pire during the period 1960-66, and no new commitments have been made recently.

On the contrary, the Commission has found it advisable, during the past year, to release for sale to the United Kingdom significant quantities of Canadian uranium which were under contract to AEC.

In consequence of our greatly strengthened uranium supply situation, the Commission announced last October that it would limit new domestic procurement which involves construction of new milling facilities. This new policy, of course, does not mean that concentrate production will be cut back or held to present levels. As stated above U308 is scheduled to increase some 50 percent during the next few years.

The real significance and meaning of this new policy is that we have reached a point in our supply picture where deliveries of uranium already contracted for appear adequate for presently projected military and power requirements.

Moreover, since we are in the fortunate position of being able to expand domestic production substantially in case of a sudden rise in requirements, any expansion now beyond levels that can be sustained by the known market in the years ahead, would be wasteful and might subject the industry to future readjustments. While this decision creates some problems, we are studying them, and Mr. Jesse Johnson, our Director of raw materials, will have more to say on that subject in a separate statement on the raw materials situation.

The size of the free world uranium reserves is of great importance both to defense needs, and to the development of the peaceful applications of atomic energy. The useful lifetime of a power generation plant is generally estimated at approximatey 30 to 35 years, and as nuclear plants cannot be easily switched from one fuel to another, an adequate future supply of uranium may well be an important factor in determining the growth of the nuclear-power industry.

In expanding its known reserves of uranium from the small amounts that were known to exist 10 years ago, to its present level, the uranium industry has met the immediate challenge of providing a raw materials base for the atomic energy industry as it exists today. With expansion as needed in the future, we are confident that the industry will wholeheartedly perform as it has in the past 10

years.

Representative DEMPSEY. Mr. Chairman, may I be recognized? Chairman DURHAM. Mr. Dempsey.

Representative DEMPSEY. Mr. Commissioner, does the Commission consider a 10-year supply of ore reserves in this country adequate? Mr. VANCE. I will ask Mr. Johnson to reply to that question. Mr. JOHNSON. I did not hear the question.

Representative DEMPSEY. I asked if the Commission considers a 10-year supply of ore reserves adequate for our Nation? Mr. JOHNSON. I can only give my personal view.

I think a 10-year supply of ore reserves is not an adequate supply unless you can be very sure that you are going to continue to be able to maintain ore reserves of that kind, because we are building atomic powerplants for 30 and 40 years from now.

Representative DEMPSEY. You have stated that Canada has a 25 to 30 year reserve. Are you expecting us to depend upon Canada for ore for the United States?

Mr. JOHNSON. My view is that the United States will be able to continue to develop uranium ore reserves at a substantial rate, and I believe that we can be reasonably self-sufficient in uranium in the future by continuing development and exploration.

Representative DEMPSEY. Do you know of any prospectors in America that are now prospecting for uranium ore since your speech in New York on October 28, 1957, when you said would not purchase from any new discovery?

(A copy of Mr. Johnson's speech before the Atomic Industrial Forum in New York City, on October 28, 1957, may be found in the appendix, p. 287.)

Mr. JOHNSON. There is very substantial prospecting, development, and exploration underway today, Mr. Dempsey, but there has been a considerable falling off of prospecting, I will admit. But I would not expect to see development and exploration to be seriously reduced since we have a $200 million to a $300 million prosperous domestic uranium industry that will be operating until about 1966.

It is inconceivable to me that this industry would feed upon its ore reserves without making provision for the uranium markets of the future.

Representative DEMPSEY. Mr. Johnson, the uranium business for the United States Government will run between $600 million and $700 million this year; will it not?

Mr. JOHNSON. The domestic uranium business in-I have the figure here—the purchase by the Atomic Energy Commission for domestic uranium concentrates was $134 million in 1956, $171 million in 1957, and we estimate that domestic purchase of uranium concentrate for 1958 will be about $247 million, and that in 1959

Representative DEMPSEY. What is the foreign purchase at that

time?

Mr. JOHNSON. The foreign purchases in 1959, when our own domestic purchases are about $322 million, the total uranium bill will be something over $700 million. There will be $400 million for foreign. Representative DEMPSEY. $400 million for foreign? Mr. JOHNSON. Yes, sir.

Representative DEMPSEY. In 1957 you decreased the unit payment for domestic ore and increased it for foreign; why was that?

Mr. JOHNSON. There was no change in the price of any of our negotiated contracts. The contracts have been firm, but over the period of years our domestic prices have been going down as a result of technological improvements, but particularly because of large-size uranium mills and the fact that domestic ores are much higher grade than foreign ores.

For the first time, I think, in 1957 in the whole history of our uranium purchases domestic prices were slightly lower than the foreign prices.

Representative DEMPSEY. Did you not at that time increase the foreign price by 3 percent?

Mr. JOHNSON. No, sir; they were not increased.

Representative DEMPSEY. I have here your financial statement—– Atomic Energy Commission statement-and it says:

Domestic sources were decreased 10 percent and foreign countries increased 2 percent.

Mr. JOHNSON. This is the situation: These are average costs per year. Each year there are new mines coming in and there are no changes in the prices of the old mines in general. The contracts remain firm. But as new contracts are brought in, the price may be a little higher or a little lower, which affects the average.

In the case of the domestic prices, our prices in the past were high. We had 100 to 200 ton mills, and inefficient processes. But as larger mills have come in, we have negotiated new contracts at lower prices than we have in the past.

Older mills have been expanded and modernized, and the prices lowered, so that the average prices moved down but the volume of domestic business is going up. It is the new contracts that carry lower prices that have pulled the average of domestic prices down. There has been no change in our ore prices.

Representative DEMPSEY. They do not seem to lower prices on the foreign products, just lower on the domestic. You have increased the foreign.

What are you paying for the foreign product in 1958?

Mr. JOHNSON. In 1958, our average cost of foreign ore-I have the figure for fiscal 1957 which was $11.18 average, and $10.80 for domestic.

Representative DEMPSEY. What is it in 1958?

Mr. JOHNSON. In 1958, I have an estimate here. This is in that October speech. We estimated for 1958 that the foreign concentrate price will be $11.15 a pound on an average from all sources.

Representative DEMPSEY. And the domestic price?

Mr. JOHNSON. The domestic price for fiscal 1958 we estimate at $9.60, which has come down in the sense that the average is coming down because new contracts with large mills and high-grade ore and modern equipment are coming in.

Representative DEMPSEY. I cannot understand why you do not solicit the uranium where it is coming down while you do where it is going up. If you were buying the domestic ore of the United States from now until 1962, you would be getting it for $210 million less than you are going to pay. You have discouraged any exploration in the United States.

Your statement made this morning said that you will not purchase any new discovered ore. So that stopped exploration.

Mr. JOHNSON. I believe the statement was somewhat different than that. The statement was with respect to new proposals. The Commission at this time is faced with limiting commitments for additional domestic uranium production. "Limiting" was the statement. Proposals for new domestic contracts which already have been submitted and are under review still will be considered in the light of discussions that have taken place.

Also, if new contracts are considered, preference will be given to providing a limited market for areas having no present milling facilities or, for that matter, inadequate milling facilities.

Representative DEMPSEY. What notice did you give the domestic producers that this was going to take place; that is, that the purchase of new ore would not be made by the AEC?

Mr. JOHNSON. This was the first announcement to that effect.

I made reference in the previous year to the fact that we may be approaching a period when the objective of the Commission would be

to maintain its ore production at some level rather than continually expand it. There were other similar statements made.

One was made in 1956, at the section 202 hearings, but then, unfortunately, there was added the statement that by 1962 we may be approaching that time. That was a failure to appreciate the tremendous growth that we have had in our domestic uranium.

Representative DEMPSEY. The Commission has just cut off purchasing from the American producers of new ore and continues buying abroad at a higher price, which is a dollar and a half a pound

more.

Mr. JOHNSON. We have had firm contracts with foreign sources for uranium. We have not made any new commitments since 1955. We have not cut off any of the domestic contracts. With all of our domestic mills, we have firm contracts, and there have been no cutbacks on any existing domestic contracts. The question is only with regard to new contracts, which may be limited. But we have been making no new contracts with foreign sources for several years.

Representative DEMPSEY. You put the American producers on notice you will not build any more mills for them or that they could not build any more mills.

Mr. JOHNSON. We have put the American producers on notice that the uranium under contract to the Commission at the present time from domestic and foreign sources is adequate for our requirements, and that the objective of the Commission would be to try to hold the production level at about existing levels.

Representative DEMPSEY. Where ore is available with no milling facilities, will the Commission permit construction of additional plants?

Mr. JOHNSON. I can only say

Representative DEMPSEY. I am asking the Commission. You are speaking for the Commission now.

Mr. JOHNSON. The announcement of last October has created a number of problems, as you pointed out, in various areas of the West. These problems are being reviewed and the information will be submitted to the Commission, as you know, from the recent hearing before the subcommittee at an early date, before March 15, and what action the Commission may take, I could not predict.

Representative DEMPSEY. I would like the Commission to give me some idea about this. You have been out in New Mexico and you have talked to the miners out there. I was there at the same time.

They asked you, “What can we do? We have so many hundred tons of ore or million tons of ore," and you said you did not know.

Have you any idea what amount of ore has been discovered that will not be purchased by the Atomic Energy Commission at this time? Mr. JOHNSON. You mean in the period between now and 1966 ?

Representative DEMPSEY. I mean for the next few years. Ore that has now been discovered.

Mr. JOHNSON. Before the announcement, our objective has been to maintain a relation between mill capacity and ore reserves that would assure as far as possible an ore reserve supply in a given area for at least 10 years and longer, if possible. We would not want to mine out all of the ore in a few years, but have a long-range milling operation. I think the important thing is to have uranium production coming after 1966.

Representative DEMPSEY. Do you not know that a great many of the small explorers out there, the fellows are working there day by day and night by night and putting in all the money they have, are losing all the money they put in, even though they discover uranium?

Mr. JOHNSON. It is my impression that in most areas that the small producer is reasonably well taken care of, probably better than some of the people who have developed large tonnages of ore. Under the existing contracts, including our milling contracts that involve new construction, there will be by 1958 a minimum-by the end of 1958mill capacity in the United States for custom ore-ore from independent miners--of about a million and a half tons a year.

I would anticipate, and I know that a number of the mills buy much more than the minimum quantities. Some of them are wholly custom mills. The market for independent ore by the end of 1958 or early 1959 will be something on the order of 22 million tons of ore a year, which was our total domestic ore production of only a couple of years ago.

The available market for independent ore is continuing to increase with the construction of the new mills that are now underway in the New Mexico area, in the Wyoming area, and elsewhere.

Representative DEMPSEY. The large production of uranium ore came in the spring of 1955; did it not?

Mr. JOHNSON. I beg your pardon?

Representative DEMPSEY. The discovery was made in 1955 with respect to the big production in America?

Mr. JOHNSON. The largest American field, Ambrosia Lake, was discovered in April 1955 by a single drill hole. It was near the end of 1955 before we had much information on it, and the ore reserves in that area—the big development--came in 1956 and 1957, which accounts for the very rapid increase in our overall reserves.

Representative DEMPSEY. In 1957 you cut the price of domestic ore and raised the price of foreign ore?

Mr. JOHNSON. We did not cut the price of domestic ore. The price of domestic ore has remained the same. Our milling contracts with the large new mills going in are at lower prices than for negotiated contracts in the past with the smaller mills. With the modern milling equipment and the good grade of ore, we have been successful in negotiating lower prices for concentrates. But the mills are still required to pay the regular ore price.

Representative DEMPSEY. I have no objection, and I approve negotiating ore at the lowest prices you can. But then you curtail their production, where you can get the ore for a dollar and a half a pound less than you are paying in Canada. I do not think that is very good judgment. They have much more capacity than we have from a milling standpoint. They have much more reserves than we have, according to your own statement. They have 25 to 30 years; we have 10.

Mr. JOHNSON. It takes 211⁄2 tons of the average Canadian ore to produce the same quantity of uranium oxide that 1 ton of average domestic produces; the ore is lower grade.

Representative DEMPSEY. The United States has some lower grade, too, but you are not giving them cost plus as you do Canada? Mr. JOHNSON. We are not giving the Canadians cost plus.