PROBLEMS OF AMERICAN SMALL BUSINESS WEDNESDAY, AUGUST 9, 1944 UNITED STATES SENATE, SUBCOMMITTEE ON MINING AND MINERALS INDUSTRY, OF THE SPECIAL COMMITTEE TO STUDY Prescott, Ariz. The subcommittee met, pursuant to notice, at 2 p. m., August 9, 1944, at the courthouse, Prescott, Ariz., W. C. Broadgate presiding. Present: W. C. Broadgate, technical consultant to the committee. Mr. BROADGATE. The conference will please come to order. First, ladies and gentlemen, I should like to introduce to you Glenn S. Francis, chairman, Yavapai County Council, Arizona Šmall Mine Operators' Association. Mr. FRANCIS. Ladies and gentlemen, I am honored and pleased today to present to you a man known to most of those in this room, and I hope to those who have come to conduct this hearing, James Whetstine, the mayor of Prescott. (Mayor Whetstine made a short address of welcome to the committee and all those present at this hearing.) Mr. BROADGATE. Thank you very much, Mr. Mayor. I want to say how glad I am to be back here among my own people, and I certainly appreciate this welcome this morning. Mr. FRANCIS. Bill, it is good to see you here. I call you Bill because that is all I know you by. There are in this room so many of your friends, and on behalf of our council I want to welcome you and your committee. All of us know the purpose of your meeting, and that you are now technical consultant of the United States Senate Small Business Committee. Without further ado I should like to turn this conference over to you. Mr. BROADGATE. Due to the immediate necessity of congressional action on certain bills now pending, I am sorry to say that Senator James G. Scrugham, of Nevada, chairman of the Subcommittee on Mining and Minerals Industry of the Senate Small Business Committee will be unable to preside at this conference. Senator Scrugham planned a series of these conferences throughout the West. I feel very pleased that he has authorized me to take testimony and receive statements in his absence for the subcommittee to use as a basis for a forthcoming study of post-war problems related to mining upon which the Senator's subcommittee staff is about to engage. Senator Scrugham has sent me to read for him the following opening statement. (Senator Scrugham's statement as read by Mr. Broadgate appears in the Phoenix hearing, on p. 5701.) Mr. BROADGATE (continuing). Now, ladies and gentlemen, the subcommittee would like to restrict the testimony to post-war problems. I understand there will be held an informal meeting this evening at which the Government cfficials from Washington and myself will be present, at which you can ask all the embarrassing questions you want, but for this recòrd it is necessary to restrict the testimony to the subjects of the conference. If you have several statements to make on different subjects it will be all right to return to the witness chair, but it will be much better if you restrict your remarks to the particular subject at hand because otherwise it will be difficult for the subcommittee staff to study the transcript. The first subject will be the necessity for stock-pile legislation dealing with metals and minerals surpluses. I am going to ask the witnesses who wish to appear-we didn't arrange a list of witnesses, so anyone can come forward and give to the reporter his name, address, and business, so that we may have it for the record. You will then be sent a printed copy of the hearing. Any of you who wish to present written statements may hand them to the reporter and they will be included in the record. Now, I hope you have all understood that those of you who wish to make statements should give your name, address, and business to the reporter. Those of you who would like to make a written statement and have it with you now, hand it to the reporter, or if you wish to, you may hand it in later and it will be made part of this record. Now, gentlemen, I want to introduce Dr. Wilbur A. Nelson, Deputy Director, Mineral Resources Coordinating Division, War Production Board. Dr. Nelson is one of the sympathetic officials we have to deal with in Washington. He knows our small mine problems and has helped us a great deal. Who will be the first witness on post-war problems of the domestic mining industry? STATEMENT OF H. F. MILLS, GENERAL MANAGER, IRON KING MINE, PRESCOTT Mr. MILLS. Present depletion rates should be maintained. Nearly all small mines have insufficient past records to establish a base for excess profits, and must then use the invested capital option. The present 8 percent exemption is not enough when the risks incident to mining are considered and should be increased to not less than 20 percent. Furthermore, invested capital is considered by the Treasury Department to consist of original cash invested. In the case of most small mines earnings are plowed back into additional plant equipment, development, or improvements, and the actual invested capital is the original cost plus all these plow-backs. If the earnings were distributed as dividends the stockholders by returning these dividends for capital improvements, could add to the Treasury's conception of invested capital, improving the tax position of the mining company, and not being any worse off themselves, outside of the personal income tax paid on the dividends received. Unless a change is made in the interpretation of invested capital, there remains little incentive to build up the production and earning capacity of mines. Labor costs make up at least 40 or 50 percent of the total cost of operation. It is evident that even with more production per man because of mechanization, that our mines could not compete with foreign mines which pay only a fraction of the daily wage received by American labor. Unless the grade of ore in our mines were substantially higher than that of foreign mines. However, the reverse is true in the matter of the grade of ore. Protective tariffs are necessary, and it is my opinion that in any case of lend-lease arrangements with foreign countries, that rather than accept goods in repayment, if the foreign wage scale is less than half of ours, that the mining industry and the country in general would be more prosperous if the applications of these countries were canceled and our domestic needs were supplied from domestic production. Now as to stock piling. All metals and ores above ground should be frozen at the cessation of hostilities. During the post-war period, ores should be concentrated and perhaps converted into metals so as to reduce volume, put them in form for easier and more stable stocking, and provide employment during this period. This plan would reduce the manpower requirement for metal production if another emergency arose. I believe that metals should be allowed, after this freezing, to seek their own level of prices. Miners have actually been able to stand on their own initiative. I am against subsidies, for if they are applied to production in general, eventually it means that each of us is being taxed to support his own production, resulting in a needless procedure, more administrative officials and employees, and a general inflated condition. Mr. BROADGATE. Thank you very much. Now, the next witness. STATEMENT OF MARK GEMMILL, PRESCOTT Mr. GEMMILL. I think I am laboring under a little misunderstanding about the subject I was to discuss, and I am not prepared to say very much about stock piling. Mr. BROADGATE. Let us hear what you have to say. Mr. GEMMILL. Well, of course, all of us seek a very necessary solution to the problem of the immense amount of raw materials on hand at the present. We feel that certainly stock piling would be an investment in security for the Nation, and also would have the further effect of preventing the dumping of large amounts of present inventories on the market. Mr. BROADGATE. Do you believe it will be necessary to support the metal market by some Government legislation in the post-war period? Mr. GEMMILL. Do you mean in addition to stock piling? Mr. BROADGATE. Do you think if all of the surpluses of minerals, metals, primary and secondary, were removed from the market by some such bill as Senator Murray has introduced, that action will be sufficient to support the post-war market, or do you think some other method should be taken? Mr. GEMMILL. I don't believe we should have subsidies after the war. Mr. BROADGATE. Do you think it will be necessary to have additional legislation to permit the accumulation of additional stock piles? Mr. GEMMILL. I don't know how much is on hand at present, and I don't know whether it would be enough or too much. But I think the stock-piling idea could be carried on so in times of low market price the stock pile might be increased. For instance, during 1932 and 1934 when copper was so low, if a stock pile had been accumulated it would have been a big help to the State and other parts of the Nation as well; and also the Government would have procured copper at a very low price. Mr. BROADGATE. Do you have anything further? Mr. GEMMILL. Not on that subject. Mr. BROADGATE. Will you step forward, Mr. Kuehl? Many of you have met Frank W. Kuehl before and know him as being very sympathetic to our problems. I should like to introduce to you at this time Mr. Kuehl, counsel for the R. F. C. I have a statement here from Mr. John Slak, of Cordes, Ariz., who asks that it be read to you, as it contains some suggestions he thinks might be of some interest. I will do so and then hand it to the reporter and it will be included in the record. STATEMENT OF JOHN SLAK, CORDES, ARIZ. Mr. SLAK. Gentlemen, for the post-war mining industry I beg to submit the following suggestions: 1. The most essential is the modification by Congress of the Securities and Exchange Act to a point whereby the Securities and Exchange Commission shall keep its hands off financing developments and operations of mining properties until a property is made into a mine and a paying proposition. Thus, giving the honest, experienced, and trained mine operators, engineers, and promoters a free hand, without fear of molestation, interference, or threats of punishments for the work well done to the best interests of the country. While, on the other hand, Arizona, as well as other States, have or should have, all the necessary legal machinery whereby to restrain fools from mining ventures, and of catching and properly punishing the fly-by-night crooks, as none of this kind are needed nor wanted in the mining industry. 2. Federal Government, R. F. C., too, should participate in greater measurements in a bit of more practical zest, pep, and thoroughness than it did heretofore. It requires combined effort, mutually pulling together, provided, if we really want to make new mines. The United States has greater untouched and unexplored metallic and nonmetallic mineral resources than any other country, without exception of Russia, and especially so throughout the 11 Western States. All of which can be verified out in the rough but never in an office, hotel lobby, or on the sidewalk. The new post-war mining developments could, and would absorb 1,000,000 men, provided things are made right politically and legislatively whereby obstacles and threats may be replaced by cooperation, and help given to those who can, are willing, and know how. Mr. BROADGATE. I have another statement, written in longhand, which I would like to have included in the record. It will be read to you. It is the statement of B. H. Brown. (The statement referred to is as follows:) |