EXHIBIT II SMALLER WAR PLANTS CORPORATION, PHOENIX, ARIZ. STATEMENT OF DE LELAND BOUSE, DISTRICT MANAGER AND LOAN REPRESENTATIVE 1. Arizona is a great copper-producing State of the Nation. The contribution made to war production has been great. Copper is basic to virtually all types of fighting weapons and equipment. 2. Copper industry largely dominated by large companies. No great field of activity for Smaller War Plants Corporation. 3. Whereas a year ago various minerals mined in Arizona were extremely crucial, such is not the case today. The end of the war is not definite but certainly there is reason to believe it is much nearer than we had hoped 6 months ago. 4. Mining industry has been helped in many ways. War Production Board has been of assistance; Bureau of Mines helpful; Reconstruction Finance Corporation has made loans and Metals Reserve Corporation was in the picture. 5. Smaller War Plants Corporation definitely interested in small mining concerns but about the only type of aid we can give is financial. In view of this fact our financial policy in regard to mines is of paramount importance. (See criteria adopted by board of directors regarding mining loans.) 6. Smaller War Plants Corporation is, however, ready and willing to help small mining operations get assistance from various agencies. We are ready to do what we can. 7. The fact that mining operations have been subsidized makes it necessary to be very realistic in regard to financial help. In other words, we must look to the future and to the affect of financial loans at this time on future operations. We could very easily do an injury to the mining industry by too liberal a loan policy. In other words, if we encourage it too much at this time, it might cause an unwarranted expansion in view of readjustments which must come when subsidies are removed. 8. Mining industry is one in which, during he war, the cost of operation was second to the need. We must think of mining operations in time of peace as well when subsidies may be removed. 9. A realistic approach to present and future conditions is the only way in which we can build a stable future for the great State of Arizona. Smaller War Plants Corporation is making continued study of mining in time of peace. EXHIBIT III SMALLER WAR PLANTS CORPORATION, Loan Policy Memorandum No. 6. From: C. W. Fowler, Executive Secretary. The development of small mines is now a part of national policy. On April 24 the President approved policies outlined by Donald M. Nelson, Chairman of War Production Board, urging assistance wherever possible to get the maximum possible output of strategic and critical minerals from the mines of the United States, making the expanse of production secondary to the object of procuring these minerals. In the light of this newly defined policy the Smaller War Plants Corporation wishes to place new emphasis upon its policy with regard to loans to small mines, and with this purpose in view, issued this revised memorandum. The policy of the Smaller War Plants Corporation is to provide financial assistance to small mining companies when they are able to demonstrate potential production of minerals needed most for war or essential civilian needs. Such companies should be able to show evidence of capable management and competence to perform. Application for such assistance should be prepared by the regional or district loan agent and forwarded to Washington for action regardless of the size of the loan required, and should be accompanied by the recommendation of the loan agent. In the preparation of such applications, careful consideration should be given to the following points: 1. We should not enter into prospecting ventures. 2. Since funds for these purposes are available from other sources, we should avoid small preliminary development loans. 3. Loans should be restricted to mines capable of getting into production within reasonable time to benefit the war effort and definite need for the product should be shown. 4. While mortgages should be secured by physical assets, repayment should be calculated upon a segregated portion of the proceeds of the sale of mineral produced. This is not intended, however, to exclude other available income. 5. There is no reason why finances should not be provided for the purpose of putting into operation metallurgical processes where such processes are approved by authorities satisfactory to the corporation. 6. Accessibility to highways, supply centers, railroads, mills, or smelters should be determined. 7. Availability of labor to operate the property should be ascertained. 8. The title to the property should be checked. The conditions involved in rentals, royalty payments, or lease and bond agreements should be scrutinized; in no case should payments required be excessive. 9. Care should be taken to see that the specific purposes and objects are set forth in detail in the application. Loans to open properties for inspection such as removing cave-ins, unwatering, etc., are ineligible. 10. Since clearance on priorities, etc., must be obtained from the War Produc tion Board before construction can be carried out, the loan agent should check these matters with the War Production Board before transmitting the application. 11. A report on the property, processes, and plan of operations by some recognized mining engineer is indispensable. If such a person is available on the staff of the War Production Board or the Smaller War Plants Corporation or the Bureau of Mines, such assistance also should be sought. Observations made in engineering reports submitted by outside engineers should be confined to a personal examination made by a representative of the Smaller War Plants Corporation. 12. The application should be prepared after thorough consultation with the applicant with a view to presenting the application in complete and satisfactory form so that it may be readily acted upon by the directors. The requirements and conditions should be fully explained to the applicant so that he will have an opportunity to correct any defects or meet any requirements deemed necessary before the application is transmitted to Washington. This will save time and delay and be of great aid to the mine operators. Mr. ROBERT S. BREYER, EXHIBIT IV SMALLER WAR PLANTS CORPORATION, Regional Director, Smaller War Plants Corporation, Los Angeles, Calif. DEAR BOB: Apropos of the mining conferences to be held in Phoenix, Tucson, and Prescott on August 7, 8, and 9, respectively, I understand that Mr. Broadgate, technical consultant for the Senate Small Business Committee will conduct these conferences and that Senator Serugham himself will not be present. We want to have a representative present, but if it is not convenient for you to attend, I should think that Mr. Bouse, our district manager in Phoenix, would be able to handle the situation. It might be well to discuss this with Mr. Podell, our general counsel, when he comes to Los Angeles with Senator Murray and the Senate committee. Mining situations are so uncertain, the Corporation has not wanted to tie itself down with definite commitments as to specific policies. On June 12, 1943. we issued a Loan Policy Memorandum No. 6, a copy of which is enclosed, and which states the policy of the Corporation at that time. Since that was issued, the situation has changed considerably, since now I believe that none of the materials produced in the Arizona area are so critical that we should consider the matter of production secondary to that of price. There might be special exceptions, but I think that in general we can say now that the operation would have to show indications of being profitable to be considered. In addition to the criteria set forth in this memorandum, the Board at its meeting yesterday added several as follows: A proven reserve of ore must be blocked out. It must be a proven operation. It must be able to prove that it will be profitable. The borrower must have sufficient equity to properly collateralize the loan. As you know, it is the general policy of the Corporation to avoid making loans the primary purpose of which is to bail out other creditors. That policy would hold in case of mines also. I believe that, with this information as the basis of your testimony, either you or Mr. Bouse can appear at these conferences and state the position of the Corporation with respect to the mining situation. If I have any further information in the meantime as to what is wanted, I shall pass it on to you. I hear that Mr. Maverick's visit in Los Angeles was a great success. Congratulations to you and your organization. Sincerely yours, S. ABBOT SMITH, Acting Chairman. EXHIBIT V RECOMMENDED PROCEDURE FOR BAILING OUT THOSE WHO HAVE HAD WAR PRODUCTION LOSSES, AS APPLICABLE TO SMALL COPPER METAL MINES (Presented by Charles J. Leftault, Bisbee, Ariz.) It is quite impossible for me to give a comprehensive review of the status of all of the small copper producers who, during the copper "crisis," were compelled to apply for and, in some instances, were granted premiums for ore quota production and the increased costs of producing copper during the last 3 years, thereby providing some of the vitally needed additional copper metal. I must, therefore, confine my observations and remarks to one example, which I think is outstanding in view of the utter unfairness of the War Production Board, Copper Division. I speak of and refer specifically to the Oliver Leasing Co., Inc., of Bisbee, Ariz. We have operated under lease agreement with Phelps Dodge Corporation since 1936 and, due to circumstances beyond our control and theirs, together with the abnormal increase in the cost of labor and supplies, a serious operating problem confronted the management during the entire time that we operated; the net result being that we were restricted as to tonnage and grade of ore produced from 1936 to 1942. We had, however, developed a small reserve of ore during that period and when our Government asked for all-out production in 1941, we proceeded to mine our reserves and attained our maximum production of copper in 1941, as shown on our production records. Our operating losses commenced in the month of November 1941 and we sustained operating losses during the entire year of 1912 and until August 1943, when we were compelled to cease operation due to impairment of our capital position. At that time we prepared a complete application stating our position and applied for a zero quota and special premium. Our application was sent in on August 12, 1943, and after considerable delay and senseless correspondence, we received on November 13, 1943, an initial quota of 58 tons that being based on our 1941 production, such quota being immediately revised to a zero quota with a special premium. The initial quota being 58 tons had the effect of depriving us of the necessary capital which we had expended during 1942 and 1943 for no retroactive premium could be paid us under the rule of the premium price plan. We are convinced that discrimination has been practiced in our case, for no reasonable excuse has been offered us in explanation of the action of the quota committee of the Copper Division, War Production Board. Under rules set forth in the premium price plan, there shall be five distinct classes of quotas. The initial quota assigned us was permissible under class 5 (c), but we had introduced sufficient evidence to permit consideration of our application and assignment of an initial quota under class 5 (d) special quota between zero and 100 percent. The quota committee has consistently refused to consider our case as a special case, in spite of our operating losses during that period although they are empowered to do so, and grant us an initial quota of less than 100 percent, such quota could be sufficiently low so as to recover for us our operating losses during 1942-43 and permit a fair operating profit. I might emphasize at this point that the purpose of the premium price plan is to expand the output of copper, etc., and to compensate operators for the extra costs involved in bringing out additional metal output. CONCLUSION There is no doubt in my mind that there are other producers similarly situated and like ourselves have contributed in no small measure to the war effort, but due to what I think is pure out-and-out discrimination have had no relief from the War Production Board. If the Board of Economic Warfare was permitted to expend millions of dollars in foreign countries purchasing metals, etc., at any price, certainly we American producers and taxpayers are entitled to at least just and equitable treatment from the War Production Board. I would recommend, therefore, that the actions of the Copper Division of the War Production Board, in cases such as ours, be reviewed by a committee appointed by the Senate and whose opinions and findings would be unbiased. Further, I feel that in cases where a sum in excess of $20,000 is necessary to "bail" out a producer that such producer be interviewed by such committee and verbal testimony be permitted and included in the record for the purpose of rendering a final and equitable decision. The amounts necessary to properly reimburse operators should be paid by the Metals Reserve Company and is properly chargeable to the cost of metal premiums during this war. OLIVER LEASING CO., INC., Copper produced in 1942.. Total. Net operating loss during 1942_. Total Net loss per pound of copper produced as above_-- Total pounds of copper produced 1936 to and including 1942_ Net profit earned on above production__ Profit schedule: Net profit earned per pound (average). 1936_ 1937. 1928 1939 1940 1941 Total.. 1 Deficit. EXHIBIT VI Mr. WILLIAM C. BROADGATE, CORONADO MINES, INC., Technical Consultant, United States Senate Committee on Small Business, Tucson, Ariz. DEAR MR. BROADGATE: Through a circular from the secretary of the Arizona Small Mine Operators Association I am advised that you will hold an official hearing in Tucson on August 8, 1944, for the Senate Subcommittee on Mining and Minerals Industry. At this hearing it is my information that you plan to hear the problems of the small mine operators of Arizona. Our company is now, and has been for the past few years, attempting to develop some mining properties in the Patagonia mining district of Santa Cruz County, Ariz. We are spending our own money. Our principal minerals are those of copper, but there are indeterminate amount of both molybdenum and tungsten ores as well as small amounts of gold and silver. We are making every effort to get into production to help the war situation. But our properties will likewise be a help to the post-war effort both in employing labor and adding to the metal reserves. At the present time one of the incentives for spending our own money is the premium above the "pegged" price of copper. Should this premium be withdrawn or should it not be renewed this would be a serious handicap, unless, however, the "pegged" price is increased to a figure that will compensate for the loss of the premium. Should large Government stock piles of metals be thrown on the market without consideration and particularly without reference to the effect on the small mine operators we feel that this would be a serious handicap. The small mine operators want to stay in business. For the benefit of western mining we feel that every effort should be made to keep the small mine operators in business. We therefore urge that such steps be taken, as are necessary, to keep the small mine operators in business; by maintaining the price of metals and, insofar as possible, simplifying Government procedure. This letter will be delivered to you by Mr. Louis Hudgin, of Nogales. Mr. Hudgin is our agent in Arizona and may have considerable to add that will be of help. With my personal regards to you, Very truly yours, MILTON LEON. Mr. WILLIAM C. BROADGATE, CORONADO MINES, INC., Tulsa, Okla., August 4, 1944. Technical Consultant, United States Senate Committee on Small Business, Tucson, Ariz. DEAR MR. BROADGATE: It is my information that you will hold an official hearing in Tucson, Ariz., on August 8, 1944, for the Senate Subcommittee on Mining and Minerals Industry. At this hearing I understand that it is the plan to consider the problems of the small mine operators of Arizona. It seems to me that one of the major problems of the small-mine operators is the reopening of the gold mines. This is one of my problems. I would like to respectfully urge that steps be taken to permit the reopening of the gold mines. As an aid to the post-war effort, I would like to further urge that there be some provision to financially aid the small operator and that the mechanics for this aid be decentralized and simplified so that the small operator can take advantage of same without the aid of expensive counsel. Further, may I suggest that thought be given to making the procedure of the Securities and Exchange Commission more simple so that the small operator may seek private capital for both speculative mining ventures and for development and operations. It seems to me that the thought should be kept in mind that the small operators and prospectors are the pioneers; that they make the discoveries that lead to the larger developments and operations; that, originally, they operate on their own resources; and that they should be given as much aid and encouragement as possible. |