EXHIBIT S-41

NEW YORK CONCENTRATES SERIOUS THREAT TO PRODUCTION OF MINNESOTA LOWGRADE ORES

In our introductory statement it was mentioned that several ore-producing companies now operating on the Mesabi Range, and whose supply of high-grade ore is being exhausted, have acquired holdings in the State of New York. There are important deposits of magnetite located in the States of New York, New Jersey, and Pennsylvania estimated at from one-half to three-fourths billion tons. The production of New York concentrates, due to more favorable taxes, lesser royalty payments and lower transportation costs, have already become a serious competitor to the continued production of low-grade Minnesota ores, as evidenced by the large recent expenditures made for their production.

For the year ending 1943 there has been expended approximately $30,000,000 in new mine development in the Adirondack area and it is estimated that these mines will produce from 4 to 5 million tons of ore annually.

With the exception of certain lump ores contained in these deposits, practically all ores require concentration. The concentrate produced is a high grade, averaging from 60 to 68 percent iron and at the higher analysis the silica is very low, 2 to 3 percent, and with low phosphorus, 0.03 percent or under. This combination makes a very desirable sinter.

Many of these eastern magnetite operations involve underground mining, but these underground concentrate ores can compete with Minnesota direct shipping open pit ores for the following reasons:

1. Eastern magnetite ores do not carry nearly as heavy taxes as do Minnesota ores.

2. Eastern magnetite ores do not have to carry the heavy royalties to the fee owners, imposed on Minnesota ores.

3. Because of the high iron content, low silica and negligible moisture content, a ton of this sinter is equivalent to approximately 1% tons of Lake Superior ores with a corresponding higher delivered value per ton.

4. The all-rail rates on eastern magnetite sinter are in most cases less than the combined rail and lake rate on Minnesota ores.

Comparison of transportation costs and ore values at lower lakes and Pittsburgh on Minnesota and New York ores

MINNESOTA ORES-52.50% F. E. MESABI NONBESSEMER

Established lower lake value per ton---.

$4.5364

Transportation to lower lake ports, rail and lake rates, plus tax and insurance_

1.9658

Balance

2.5706

Shrinkage allowance_.

.0453

Balance available for production, taxes, royalties, depletion,

investments___.

2. 5253

Value of Minnesota ore delivered at Pittsburgh, $4.5364+ (1.21+.09+ 3%=--

5. 8754

Cost of transportation to Pittsburgh, including tax, interest, and insurance ($0.92+.94+1.21+.09+3%)+.05=

3. 3048

Balance

Shrinkage allowance__

2.5706 .0453

Balance for production, taxes, royalties, depletion & investments-- 2.5253 Value per iron unit delivered at Pittsburgh, $5.874+52.50-11.191 cents.

NEW YORK ORES-65% F. E. OLD RANGE BESSEMER, 0.03 PHOSPHORUS New York ores delivered at Buffalo based on 65% Old Range Bessemer, 0.03____

Transportation to Buffalo, All-rail--- $1.775+3%=

=

Balance available for production, taxes, royalties, depletion, and

investments.

Value of New York ores delivered at Pittsburgh based on value of
Minnesota ores--- $11. 191 X65=_.

Plus phosphorus allowance__

Total value New York ores at Pittsburgh__
Transportation to Pittsburgh, all-rail ($2.58+3%) =

=

$6. 1714 1.8282

4. 3432

7. 2741

.1725

7.4466

2. 6574

Balance for production, taxes, royalties, depletion, and investments____ 4.7892

COMPARISON OF TRANSPORTATION COSTS ONLY

Minnesota ores to Pittsburgh market (.92+.94+1.21+.09)+3%)=--
New York ores to Pittsburgh market (2.58+3%)=

Handicap to Minnesota ores in rates---

3. 2548

2. 6574

.5974

The above advantage clearly points out why the New York ores are a serious threat to Minnesota low-grade production. Not only is the cost of transportation lower on New York ores, but the value of the ore transported is considerable higher, $6.1714 compared with $4.5364 per ton based on lower lake ore prices. The following table was taken from the January 1944 issue of Mining Technology T. P. 1629 Concentration of Iron Ores in the United States by T. B. Counselman:

EXHIBIT S-42

INTERSTATE COMMERCE COMMISSION

No. 29502

BUTLER BROTHERS v. GREAT NORTHERN RAILWAY COMPANY ET AL.

Submitted June 14, 1949. Decided January 9, 1950

Rates and dockage charges on beneficiated iron ore, in carloads, from Keewatin, Nashwauk, and Hibbing, Minn., to docks at Allouez, Wis., and Duluth, Minn., for shipment thence by water, found not shown to have been or to be unreasonable. Complaint dismissed. Philip H. Porter, Francis Butler, and Pierce Butler for complainant.

J. A. A. Burnquist and Victor J. Michaelson for State of Minnesota, and Fred A. Cina for range municipalities in Minnesota, interveners supporting complainant.

Edwin C. Matthias, R. J. Hagman, L. E. Torinus, Jr., Donald D. Harries, Franklin B. Stevens, Elmer F. Blu, Chauncey H. Hand, Jr., George W. Whittaker, and G. Clark Cummings for defendants.

W. J. Quinn, Carson Taylor, P. F. Gault, R. R. Eldredge, and M. L. Countryman, Jr., for interveners supporting defendants.

REPORT OF THE COMMISSION

BY THE COMMISSION:

Exceptions to the report proposed by the examiners were filed by complainant, defendants, and interveners, and the issues were argued orally. Our conclusions differ from those recommended by the examiners. Exceptions and requested findings not discussed in this report nor reflected in our findings or conclusions have been given consideration and found not justified.

By complaint filed March 13, 1946, as amended, complainant corporation alleges that the rates on beneficiated iron ore, in carloads, from Keewatin, Nashwauk, and Hibbing, Minn., to docks at Allouez, Wis., and Duluth, Minn., for shipment beyond by boat, and also the dockage charge for storing and dumping the ore into vessels, were and are unreasonable. We are requested to prescribe a reasonable rate and dockage charge, and to award reparation for the statutory period in the amount of $1,032,571.76, or such other sum as we shall determine. The issues are related to those under consideration by the Minnesota Railroad and Warehouse Commission in its docket No. A-6846, an investigation of the rates, rules, and regulations applying on iron ore and nonmerchantable iron formation material for beneficiation and test purposes between points in Minnesota. The interstate and intrastate proceedings were heard jointly, on various dates in 1947 and on March 17 and 18, 1948. By stipulation of the parties, we have been able to avail ourselves of the latest authentic information as to the traffic and financial status of the defendants. The facts stated herein reflect our use of the material thus made available.

Description of the traffic.-The three origin points are served by the Great Northern Railway Company. They are on the Mesabi Range in the Lake Superior iron ore region. The iron deposits in this region are the largest actively mined in the world and supply between 80 and 85 percent of the iron ore used by the steel industry of the United States. There are six principal ranges in the region, three of which, the Marquette, Menominee, and Gogebic, are in western Michigan and northern Wisconsin; and the others, the Mesabi, Vermilion, and Cuyuna, are in northern Minnesota. The most important of these ranges is the Mesabi. Its output is from 75 to 80 percent of the production of the Lake Superior region and about 92 percent of the Minnesota production. During the last 50 years, about 1,500 million tons of Mesabi ore were shipped. In 1947, the total ship

1

1 Iron ore tonnage will be stated in long tons of 2,240 pounds.

ments were 59 million tons. This volume, however, must be regarded as above normal, compared with the shipments made in prior nonwar and nondepression years.

The evidence is conflicting as to the amount of commercial iron ore remaining in the Minnesota reserves, the estimates ranging from 1,000 to 1,572 million tons. A large proportion of the Minnesota ore is shipped by the Oliver Iron Mining Company, which is owned or controlled by the United States Steel Corporation. In 1944, the Oliver Company shipped about 56.5 percent of the Minnesota ore. Complainant produces only beneficiated ore and only about 4 percent of the tonnage from the Mesabi Range. Its shipments equal or exceed those of all socalled independent shippers. Complainant shipped 2.6 million tons in 1944, 3 million tons in 1945, and 2.6 million tons in 1947. In 1946, it produced 300,000 tons by straight washing and 1.5 million tons by jigging and heavy-media separation, hereinafter described. In that year, it shipped almost 1.8 million tons over the Great Northern to Allouez docks and only 17,991 tons jointly over defendant's lines, namely, over the Great Northern through Allouez to Saunders, Wis., thence a few miles over the Duluth, Missabe and Iron Range Railway Company, hereinafter called the Duluth Missabe, to that carrier's Duluth docks. The joint haul is 30.7 miles longer than the one-line haul. In 1946, the average haul of complainant's shipments was about 119.5 miles and the average carload about 60.31 tons.

Rates assailed and sought.-The assailed rate from the Mesabi Range to the docks when for points beyond "via lake" is 81 cents,' minimum weight the visible capacity of the car. This rate includes switching at origin and destination, and also diversion, if any, and weighing. The dockage charge is 11 cents. The furnishing and maintenance of docks, including cost of labor, is the principal expense covered by the latter charge. It also covers the dumping of ore from car to dock pocket and from pocket to vessel, and includes a maximum period of 10 days' storage in docks or in cars at dock yards. No demurrage as such is charged on cars of iron ore, but if the ore is not loaded into the Vessel within 10 days after arrival at the dock yards, an additional charge of 0.25 cents per ton is made for each day or fraction thereof after the first 10 days, except that no charge accrues after the close of the season of navigation. Complainant seeks a rate of 72 cents, plus a dockage charge of 11 cents, or 83 cents in the aggregate, both for reparation purposes and for the future, without the addition of the general increase authorized in 1948.

If complainant secures a rate reduction on its traffic, the Great Northern anticipates that other beneficiation plants on the Mesabi Range will demand similar reductions on their traffic. Complainant recognizes as do the defendants, that the rate and charge assailed must be tested by the reasonableness of the group rate on all classes of ore from the Mesabi-Vermilion Ranges as a whole. The Great Northern and the Duluth Missabe participate in the great bulk of the Mesabi-Vermilion ore traffic, and at the same group rate.

Interveners in support of complainant.-Interveners supporting the complaint are the State of Minnesota and the Range Municipalities and Civic Association, a voluntary organization of all cities, villages, towns, and school districts in the ore mining district of Minnesota. The State of Minnesota holds in trust large reserves of iron ore on the Mesabi Range. These reserves are of low-grade iron ore which can be produced and sold profitably only at relatively low freight rates. In addition, as taxes are based largely on the value of ore at the point of shipment, the freight rates affect the tax yield to the State from private iron ore reserves and affect the so-called occupation taxes on privately produced ore. The State is also concerned about the rapid depletion of high-grade ores. To make the processing of low-grade ores economical, transportation and other costs must be reduced to a minimum. The public revenues and general economy of the municipalities represented by the other intervener are dependent upon the continued production of iron ore. Likewise, the population in this area is dependent for its sustenance upon the mining and processing of iron ore.

2 Since the hearings, certain steel interests which compete with the United States Steel Corporation have acquired a controlling stock interest in the complainant corporation. 3 Owned or controlled by the United States Steel Corporation.

Except as noted, rates and charges on iron ore are stated herein in amounts per long ton and do not include the authorized general increase of 11 cents, to 92 cents, in the rate and of 2 cents, to 13 cents, in the dockage charge, effective May 6, 1948.

Interveners in support of defendants.-After service of the proposed report, certain rail carriers' serving the Cuyuna, Gobebic, Menominee, and Marquette Ranges were permitted to intervene in support of defendants. With the exception of the Duluth, South Shore and Atlantic Railway Company, which is still under trusteeship, all of these interveners except one emerged in recent years from reorganization under the Bankruptcy Act. They are opposed to any reduction in the rate assailed, on the ground that any substantial decrease therein would seriously affect the tonnage or rates from the ranges which they serve and the revenues which they receive therefrom.

Classes of iron ore.-Class 1, or high-grade ore, is known as direct-shipping ore. It is usually of low silica content and as shipped is composed of more than 52 percent iron. The United States Steel Corporation owns most of this ore, but has been selling it to any prospective purchaser. This ore is usually mined from large open pits, where it is often loaded directly into rail cars for shipment. The tonnage of underground or shaft mines producing directshipping ore is comparatively small, as production costs are high. In 1946, less than 1 million tons out of a total production of 46.3 million tons of Mesabi ore came from underground mines. In 1940, about 33 percent of ore was subjected to dry screening or crushing, and since then this percentage has been increasing steadily. This treatment is comparatively simple and does not change the mineral content. Open-pit mining of class 1 ore makes it easy to establish and maintain high production, as was done during the recent war.

Class 2 is the beneficiated or concentrated ore. Practically all class 2 ore comes from open pits. The crude material as mined contains too little iron and too much silica for blast-furnace use. Some of this crude material requires beneficiation by dry screening and washing with water under pressure while on vibrating screens, whereas other material requires more expensive beneficiation, such as crushing, grinding, jigging, high-density separation, sintering, or a combination of such processes. In 1944, complainant's recovery of concentrates was 47.2 percent of the crude material. Blast furnaces operating on Lake Superior ore require a mixture containing not over 8.5 percent silica. beneficiated ore contains from 8.5 to 15 percent silica, it generally must be mixed with class 1 ore of low silica content to meet the necessary requirements. In 1946, beneficiated ore represented 22.8 percent of the total shipments from the Mesabi Range, as compared with 17.4 percent in 1923. This class of ore represents about 60 percent of the shipments over the Great Northern, as compared with only 6 percent over the Duluth Missabe.

As

Class 3, or taconite, contains only 30-percent iron. It is an ore-bearing rock which must be crushed as fine as cement, and of which two tons are rejected to obtain one ton of concentrate. This concentrate must be agglomerated. The operation is expensive and requires complex plants and machines. The development of taconite is in the experimental stage. No concentrates therefrom have been shipped to the lake ports.

Competition between classes of ore.-Complainant sells beneficiated ore in competition with direct-shipping ore. When the two classes of ore compare closely in analysis of iron content, they are interchangeable so far as the buyer is concerned, and they sell for practically the same price. On the average, however, beneficiated ore is the more valuable because of higher iron content. In 1943 and 1945, the average value of beneficiated ore from the Mesabi Range exceeded the average value of direct-shipping ore by amounts ranging from 13.32 cents to 48.01 cents per ton. Both ores require more or less processing. Beneficiated ore requires additional operations not required by direct-shipping ore. While some of the latter ore is loaded directly into railroad cars, in many instances it must be transported by the mine railroad, trucks, or conveyor belts to crushing and screening plants for subsequent shipment over defendant's lines. Unless the railroad tariffs were to provide otherwise, what is now considered direct-shipping ore might be made to qualify under the definition of beneficiated ore by a minimum of inexpensive washing. Many mines now produce both classes of ore. Production costs vary at different mines on the some range.

Defendants consider royalty as a profit paid to the fee-owner rather than as an operating cost. Some mines, operated by the owner, pay no royalty; some

5 Chicago, Milwaukee, St. Paul and Pacific Railroad Company: Chicago and North Western Railway Company: P. L. Solether, as trustee of the properties of Duluth, South Shore and Atlantic Railway Company; Minneapolis, St. Paul & Sault Ste. Marie Railroad Company; and Northern Pacific Railway Company.