when you say, Mr. Mittendorf, that when you get up beyond 30 percent ore that you are going to be above the Mills bill program; actually this whole program, therefore, is a delusion, that there isn't any ore around the country that will meet these nice qualifications that you are dangling out and telling the public that you have got on a recoverable basis; isn't that a fact?

You have just heard now, Mr. Bradley say there is only one place in America that has got ore that will even come up to 20 percent, let alone go to 35 that you are talking about.

Mr. MITTENDORF. I simply cited the difference; I was asked a question, what the difference was between the two, the Mills bill and this

curve.

I want to say this, and make it very clear, that we have attempted to put out a schedule which is fair. Others have okayed it in DMA. It is open to revision. There is nothing sacred about it.

Mr. SAYLOR. If your schedule is to be realistic, the prime purpose of any schedule called a manganese program is to produce manganese, isn't it?

Mr. MITTENDORF. Certainly.

Mr. SAYLOR. And if your schedule goes off into the ethereal, where there is no such manganese in this country, it isn't very realistic.

You are going up now to 35 and 40 percent. What are you going to pay up there when there isn't any ore like that? How about talking about the ore that we have got in this country?

Mr. MITTENDORF. I had people come in to see me only Friday who wish to build a sink float plant at Deming and raise the grade of ore up to 35 and 38 percent with a very simple method of concentrating.

Mr. BRADLEY. You have got to have a high end schedule because you will get offers of some low-grade ores, or you will get offers of a highgrade produce made from the ores you speak of at individual mines.

Mr. ENGLE. Let me ask this question. This stuff has to be upgraded. What do you call a usable grade of ore, 40 percent ?

Mr. MITTENDORF. A minimum of 40.

Mr. ENGLE. In other words, you have to figure on up-grading that ore probably to an average of 20 percent; is that right? Do you know that you can upgrade it?

Mr. MITTENDORF. We believe we can reach the 40 percent, based on all of the tests that have been made.

Mr. ENGLE. The point is though that since the ore has to be upgraded, and since your schedule for the up-grade ore puts a limitation on tonnage of 4,320,000 units, the limitation is such on the upgraded ore that a producer can't hope to come out on a mill; isn't that right? In other words, he has got to pay the cost of up-grading and the cost of up-grading will eat him out of pocket unless he has enough of it or a big enough program to get him into a safe landing financially; isn't that right?

DEMING DISTRICT MANGANESE PROGRAM HELD QUANTITATIVELY INADEQUATE TO JUSTIFY PRIVATE INVESTMENTS

The criticism I hear of this program is that it is too small. What comment do you have on that, Mr. Mittendorf?

Mr. MITTENDORF. I have this comment. I think that additional funds will be available. As you go before the Budget Bureau, as I have had

to do, and justify an appropriation, Congressman, you say, "Here are the facts. Here is the total ore which is inferred in the district. We think it is going to cost us ultimately $2 a unit, whether we beneficiate it or somebody else does. Will you give us enough money to take care of such a project?"

That is about as much as you can justify before the Committee on Appropriations, until greater ore tonnages are proved.

Mr. ENGLE. What you are saying is that admittedly the amount is too small, but you think there will be more money? You can't expect mining men to proceed on the assumption that there is going to be pie in the sky. He wants to know what the Government is going to do, doesn't he?

Mr. BRADLEY. I want to say something, if I may, in defense of that figure for the present purpose.

That figure cannot be defended for long-range purposes, but we were asked to get up budget figures here about a month and a half ago and right in the middle of a lot of other things we had to drop everything and the entire DMA staff was busy for about 10 days working up all these things and all the prospective contracts and all the prospective purchase commitments, into the form of budget.

It was just another one of the typical madhouse whirls we get into over there once in a while, and this was for the purpose of working out the commitments that might be made in the fiscal year 1951; we put down a figure, based on the absorption at Deming, of I think about 250 tons a day-at least it was 60,000 tons a year, from which you could recover 18 units per ton and over 4 years of purchasing that would amount to four million-odd units.

Recognizing that that was only applicable to those contracts which we would make before the 30th of June of 1951, which is only about 12 days off now, or 15 days off, for fiscal year 1952 the whole thing can be reopened, and certainly the events of the next 15 days are not going to completely control or completely decide the procedure for the next 5 years out there at Deming, or on anybody's part, Government's or industry's.

Mr. ENGLE. Would you put your name on a contract for 5 years based on the assumptions of this program if you were a miner out there, Mr. Bradley, and you have done a lot of mining?

Mr. BRADLEY. It would depend upon the mine I had. We have applicants before us that state they will turn out something like a thousand tons a day when their mines are all in full operation, 18 months hence.

If I were that applicant I would not be satisfied with the figure here.

Mr. ENGLE. Is it true that they can't hope to come out on their operation with a limitation such as they have here on unit quantities? Mr. BRADLEY. They are entitled to a natural suspicion of the Government. In other words, to say it differently, they are entitled to place

Mr. ENGLE. That was a very correct statement, sir.

Mr. BRADLEY. In other words, they can place the experience of the last 5 or 10 years-they can place reliance only on those things that are actually written into orders.

Mr. ENGLE. That is right. If they are asked to put their John Henry on a piece of paper which will leave them inevitably holding

the sack unless these unit quantities are moved upward, they are not going to do it, are they?

Mr. BRADLEY. I would say not.

Mr. ENGLE. Do you mean then, is it a proper conclusion then that this program simply won't get anybody's name on a piece of paper? Mr. BRADLEY. There will be small producers; there might be producers out there that would fulfill all the purposes of this program and some big fellows lag back.

Mr. ENGLE. If some fellow had some high grade that he could deliver and he wasn't bound to deliver any particular quantity, but he would be paid for what he did deliver, then he would be all right? Mr. BRADLEY. That is right.

Mr. ENGLE. But the fellow who had to up-grade in order to get a price under this schedule, which would get him into a safe landing financially, would not be willing to make the capital investment in facilities for up-grading unless he had sufficient quantity so that he could come out over the long haul, would he?

Mr. BRADLEY. That is right.

Mr. ENGLE. The miners say this won't do it. Are they right or wrong?

Mr. BRADLEY. The big miners are right and it is not a matter of interest to the little miner.

Mr. ENGLE. The big miners are right and it is not a matter of interest to the little ones because they will deliver high grade? Mr. BRADLEY. They will get in under it without any difficulty. Mr. ENGLE. Is my conclusion correct that the program won't work then?

Mr. BRADLEY. I don't say you can say unequivocally that it won't work because it will work to some extent, and I dare say

Mr. ENGLE. It will work to the extent that the small miners bring in wheelbarrows full?

Mr. BRADLEY. I daresay these fellows are gamblers enough to proceed in at least a cautious fashion. They won't stop altogether. They will proceed in a cautious fashion on the premise that these figures will be changed and I think you heard here last Thursday, Mr. Morgan saying that these figures so far as the DPA were concerned could be changed within reasonable limits at almost any time. Mr. ENGLE. Is it a fair statement then that these figures have to be changed before we have any reasonable assurance that there will be results from this program?

Mr. BRADLEY. I would say they should be changed.

Mr. ENGLE. Well, now Mr. Mittendorf, let's move over one notch here; will you agree that these figures have to be changed before there is a reasonable assurance that this program will work?

Mr. MITTENDORF. I can't agree to that.

Mr. ENGLE. How are these fellows going to get out on this now? Will you explain that?

What kind of financial acrobatics are they going to go through in which they will upgrade this ore with the capital investment in a mill when you haven't established sufficient quantities which would permit them to recover their capital investment?

CONTENTION MADE BY DMA THAT DEMING DISTRICT MANGANESE PROGRAM IS WORKABLE

Mr. MITTENDORF. They don't have to upgrade it; they can ship on this schedule and based on their ore reserves they should do quite well.

May I read from a letter that I received from the largest potential producer in the Deming area?

Mr. ENGLE. Who is that?

Mr. MITTENDORF. The Haley Mines. [Reading:]

We are prepared to start work immediately in this district and have engineers and several miners at work at present.

A small amount of access road is required for four properties, but all others are fully accessible and certain material and bins necessary for rehabilitation are ready on order.

We await only the adoption of a definite 5-year program in order to immediately proceed with the opening of these properties and we will be ready to start deliveries to the stockpile prior to the completion of the proposed stockpile ore-handling facilities.

Mr. ENGLE. That is a very interesting letter, but he doesn't say anything about price. Doesn't the letter presuppose that both the price and quantities will be sufficient?

Mr. MITTENDORF. He says nothing about price, and in the pursuit of our business, we expect a man--they do it in every case-to justify why they need a price. That gives us the means to make a recommendation that we can stand back of, knowing it will stand up against the wear and tear of examination.

We have nothing like that from these people that are doing the crying. They just say, "It won't work," and the gun goes in your

back and there it is.

We are willing to consider any data. We have prepared forms upon which one may justify his needs and describe capital expenditures they are making. We will give full consideration to such facts, but in the absence of them, we use our very best judgment to prepare a schedule which we think will work. At least it is based on tangible data and business principles.

The principle won't change, but if new facts are presented we certainly will consider them.

Mr. ENGLE. Of course, Mr. Mittendorf, I might say here parenthetically that this is precisely the reason I have always supported a differential premium because when you get into this business of trying to fix a price based on somebody's justification of costs, you always have that argument, and whenever you fix a price, if a man has a rich mine, you make him rich, where some fellow who has a 1 percent mine above the price, or below the price that you are paying, he can't fit in and that is why I have always favored, in times of emergency such as these, a differential price system, based upon the whole premium price program.

That is why this whole business is an interminable piece of confusion, but what the Government is willing to risk in undertaking a program like this should depend upon the necessities of the Government as to the procurement of these materials.

82354-52- -37

MANGANESE CONTRACT, THREE KIDS MINE, NEVADA

Now I have looked over this schedule here and I see that on the Three Kids manganese mine near Henderson, Nev., you have a contingent liability of something like $52 million; is that right? Mr. BRADLEY. I think that is right.

Mr. SAYLOR. You notice the contract for the Three Kids does not become effective until January 1, 1952. It isn't producing an ounce of manganese right now. They talk about completed contract, but the contract doesn't go into effect until January of next year.

They have been talking about that great contract with Three Kids since they have been here, for the past 6 months. If you will read the contract you know it isn't producing an ounce of ore.

Mr. ENGLE. That is right.

Mr. SAYLOR. We are interested in what they are going to do to produce ore now, not 6 months from now or a year from now as we were when this thing started.

PLANNED DOMESTIC MANGANESE PROGRAMS WOULD STILL LEAVE UNITED STATES DEPENDENT ON FOREIGN IMPORTATIONS FOR 85 PERCENT OF

REQUIREMENTS

Mr. ENGLE. Mr. Saylor, this illustrates the proposition that you don't start a mine by turning a spigot on; it takes some time to develop a mine. The anticipated annual production from the Three Kids mine will be about 4.8 percent of the annual domestic consumption.

When you add everything up that they have in all five of these areas that is, the Three Kids mine in Nevada; Butte and Philipsburg, Mont.; Batesville, Ark.; Deming, N. Mex.; and El Paso, Tex.and if you put the whole business into operation you only have 11 percent of the annual domestic consumption of manganese and at the present time we are importing something like-what is it, 92 or 93 percent?

Mr. BRADLEY. At the present time we are producing only about 5 percent.

Mr. ENGLE. In other words, after you get this whole program, loused up as it is, into operation, we will still be 85 percent or more dependent upon foreign importation, from sources which may be unavailable in the event of an all-out war; is that a fair summary? Mr. BRADLEY. Yes.

Mr. ENGLE. Is that a fair summary, Mr. Mittendorf?

Mr. MITTENDORF. You are referring to these specific programs, not the slag?

Mr. ENGLE. I have added up the five of them and come out with 11 percent of the annual production, or annual consumption; is that right?

Mr. MITTENDORF. I will accept that.

Mr. ENGLE. Which leaves us over 85 percent dependent upon sources which may be unavailable in the event of an all-out war.

Mr. MITTENDORF. That is the responsibility of the Supply Division. If Mr. Bradley says the figure is correct, I will accept it.

Mr. ENGLE. Whether you are responsible for it or not, when you start negotiating a contract, your negotiation of that contract should