Dr. BOYD. Under the definition of the term, I am afraid not. It couldn't stand on its own feet without support. Mr. BENNETT of Michigan. So it wouldn't be economic. Dr. BOYD. That is right. Mr. BENNETT of Michigan. Then you are not using a yardstick in all these cases, then? Dr. BOYD. No, not under the emergency we have today. Mr. BENNETT of Michigan. To get an amount of copper or any of these metals, you are going to have to pay over the market price? Dr. BOYD. That is correct. Mr. BENNETT of Michigan. How far over the market price have you gone on these projects? Dr. BOYD. Some of the ones we are considering, we have not actually signed a contract for those, we will let those go to last. Some of them will have to go up to as high as 30 cents. SAN MANUEL (ARIZONA) COPPER PROJECT Mr. BENNETT of Michigan. What about this San Manuel project? Dr. BOYD. That is an economic operation. Mr. BENNETT of Michigan. Was the price paid there exceeding the market price? Dr. BOYD. The floor price is 17 cents; the market price is 242. Dr. BOYD. In that contract we only agreed to support the price at 17 cents. I am not quite sure of that figure, but it is something like that. As I said, there is an escalation clause in the contract, for each million dollars above the estimates, there will be a 1-cent increase from the floor in order to permit them to amortize their cost. Mr. BENNETT of Michigan. It might go as high as 30 cents a pound. Dr. BOYD. It couldn't possibly, because the estimates have to be 15 to 20 percent wrong to have it go above the market price at all. I am sure they are not that far off. WHITE PINE (MICHIGAN) COPPER PROJECT Mr. BENNETT of Michigan. I would like to ask you just one or two questions about this White Pine project, up in northern Michi gan. Dr. BOYD. Yes. Mr. BENNETT of Michigan. As I understand it, that contains one of the largest copper, undeveloped copper ore valleys in the world. Dr. BOYD. That is correct. Mr. BENNETT of Michigan. And probably the largest undeveloped copper ore bodies in this country? Dr. BOYD. That is correct. Mr. BENNETT of Michigan. As I understand it, an application on that project has been in the hopper since last October? Dr. BOYD. That is right. Mr. BENNETT of Michigan. Will you tell me what the present status of it is? Mr. BOYD. Originally, that project came in-they came in for assistance on a 10,000-ton basis a day. Because of the urgency of the request, we asked them to go back and study it, and see if they couldn't increase that to possibly 30. After they studied it awhile, we went up to investigate it, and work it out with them. We found out that it would be a very dangerous thing to spend that much, because of the uncertainties of the mining operations, and the cost of production, and the delineation of the ore body itself. So we had now reduced that again to 10,000-ton level, and the company is coming in with more equity capital in it than they had before, and we reopened negotiations, and the president of the company has been down this week working with our people. He told me a couple of days ago he was quite satisfied with the progress. Remember, this is a very large project, it takes a lot of money, and that company has to be careful about that contract. Mr. BENNETT of Michigan. There is a lot of copper there, and we need a lot of copper. Dr. BOYD. That is right. In normal times, the company would spend a year or more negotiating a contract. We will try to get it done in better than 2 or 3 weeks. Mr. BENNETT of Michigan. Do you expect the contract will be issued on that project within a reasonable time? Dr. BOYD. It will depend on how we can iron out the difficulties in getting an equitable contract between the Government and the company so they can live under it. Mr. BENNETT of Michigan. It seems inconceivable with the copper shortage there as it is, that development wouldn't be put into operation under any substantial program, would it? Dr. BOYD. Of course, it has to be. Mr. BENNETT of Michigan. I guess that is all. Mr. REGAN. As long as we are on copper, before we get away from it, I would like to get a little enlightenment about this set-up here. Dr. Morgan, you, some time ago, said something that was interesting. You certified to the Defense Minerals Administration that the United States needed so much copper. Dr. MORGAN. That is right, sir. FORMULATION OF COPPER PROGRAM DISCUSSED Mr. REGAN. SO Dr. Boyd started his staff working on the program of how you are going to get that copper, how much it is going to cost, how much we can get domestically, and probably what we might get abroad, but we are more individually concerned about the domestic supply at this time. He goes to work on the program, and he submits to you a plan; I don't know how long that took. I think it might be interesting to know that dates you certified to him you needed so much copper, then he goes to work on it, he brings you a program, then you turn it down and send it back to him. Dr. MORGAN. It didn't work that way, sir. I can tell you, I believe, in the case of copper, how long it took-you realize, of course, sir, it took quite a while to work up these requirements. Mr. REGAN. I do. Dr. MORGAN. And that work was done in the DPA with help from DMA and other agencies. Mr. REGAN. Yes. Dr. MORGAN. So during that period of time we were undoubtedly holding up the program. Now, Dr. Boyd submitted his copper program to us on April 17, 1951. That is the date the letter left his office. Mr. REGAN. He has. That was April 17. Can you tell us when you delivered to him your estimated requirements? How far back of that? Dr. MORGAN. Well, it was some time shortly before April 14. Dr. BOYD. We completed the program April 14; it was cleared by the Secretary's office in 2 days, went over there and was cleared by DPA shortly after. It was a very short period of time. Mr. REGAN. You got the requirements on April 14? Dr. BOYD. They came over rather informally, so we wouldn't have a formal submission of them to give you a date, but it wasn't more than a week or so before that. Mr. REGAN. You did all this after they find out what the copper needs are going to do; they say to you they are going to need so much copper, and you, in less than a week's time, had a program to submit back to them? Dr. BOYD. That is right. Mr. REGAN. Then what happens? Dr. MORGAN. We got that program from Dr. Boyd on April 17. Mr. REGAN. Yes, sir. Dr. MORGAN. It took perhaps a day or two for the letter to get over. It took another day or two for us to check around and make sure DMA used the right data. It took a couple of days more when people saw the dollar value of this copper program. And on April 25, 1951 Mr. REGAN. April what date? Mr. MORGAN. April 25, that is just about a week after we received it. Mr. REGAN. Yes. Dr. MORGAN. We wrote a letter back to Dr. Boyd, saying we had approved his general copper program, and asked him to proceed with the implementation of the general copper-expansion program. So since that day, he has been getting his contracts ready to send over to us. Now, in fact, he had sent at least one contract, the San Manuel copper contract, over to us before we had the general copper program, and his negotiations with these different producers didn't start when he got our letter back approving it, but they have been going on simultaneously during this time, also. Dr. BOYD. We began negotiating these contracts for copper in October or November." I asked a couple of companies to bring in their projects almost as soon as Mr. REGAN. You did that in anticipation of ultimately hearing from the Defense Production Authority? Dr. BOYD. That is right, sir. Mr. REGAN. As to how much they are going to need. You began to lay your ground work. 82354-52- -33 Dr. BOYD. That is correct. Mr. REGAN. So finally, they told you, and in a week's time they submitted the program. Dr. BOYD. That is right. Mr. REGAN. They, in 8 days, said the program was O. K.? Mr. REGAN. Now, you are going ahead with the contract? Dr. BOYD. That is right. These are the kind of contracts Mr. Engle and I were talking about this morning; they are very complicated. The San Manuel is a big contract, about 30 or 40 pages long. Mr. REGAN. Is there any other question on this subject of copper! If not, Mr. D'Ewart would like to ask something about chrome mines. COPPER TO BE PURCHASED AT PREMIUM PRICE AND LOSS ABSORBED Mr. ENGLE. May I just ask one question on copper? As a general proposition, have you accepted the principle of premium price in your contracts? Dr. BOYD. The ones which can't be produced at the present market price, which is quite high, we will enter into a contract to purchase, and resell that at the ceiling price, or to put it in the stockpile, whichever is the best to do, so that in essence is a premium for expanded production in a high-cost mine. Mr. ENGLE. Who absorbs the difference between the actual market and the premium? Dr. BOYD. That will be done under the Defense Production Act: the funds will be made to purchase, and the loss will be absorbed by the Government in resale. Mr. ENGLE. In other words, it is the old premium price program on a selective basis. Dr. BOYD. We worked out a 2- or 3-month contract and don't change the prices for 2 or 3 months; once it is signed it remains in effect until it is completed. Mr. ENGLE. Do you have escalator clauses in it? Dr. BOYD. Yes. Mr. ENGLE. Do you provide for renegotiation? Dr. BOYD. If we do a good job in the first place, we won't have to renegotiate. Mr. ENGLE. The San Manuel contract has a floor price? Dr. BOYD. That is right. Mr. ENGLE. That is all, Mr. Chairman. BLANKET SUBSIDY PROGRAM TO BE DEVELOPED ON LEAD AND ZINC Mr. BUDGE. Doctor, I understood you to say you were going to do approximately the same with your program of lead and zinc. It is going to be on some kind of bonus arrangement; is that right? Dr. BOYD. Yes; except for the fact of being 20 or 30 individual projects in lead and zinc, there are hundreds, and the task of negotiating individual contracts in that field will be impossible, as Mr. Engle pointed out this morning, so we have to develop a blanket program for that. That is a little more difficult to do, because we have to be careful with it. Mr. ENGLE. What kind of a program did you say you have? Dr. BOYD. A blanket program, to prevent the necessity of going into individual contracts. Mr. ENGLE. You are thinking in terms of a differential premium. Mr. ENGLE. That is the old premium price arrangement? Dr. BOYD. No; it isn't. Instead of being an individual subsidy, it will be blanket subsidy. Mr. ENGLE. The only difference between a differential premium based on cost, and the blanket premium, is that somebody is apt to be taken, based on the blanket premium, whereas by the other method a different premium is established for each operation; is that right? Dr. BOYD. That is right. Mr. REGAN. Do you have anything further? BONUS CONSIDERED FOR NEW AND INCREASED DOMESTIC LEAD PRODUCTION Mr. BUDGE. I would like to ask another question, too. Doctor, now let's take lead as the specific item here. We have a present price ceiling on lead, domestic mined lead, at 17 cents, yet the world market, I believe, is somewhere around 22. Is that about right? Mr. BOYD. I think that is right. It has been sold even higher than that in the world market. Mr. BUDGE. Your policy, as I understand it, working together with the Office of Price Stabilization, would be then to retain the ceiling at 17 cents on lead, and pay a bonus to the producer of the lead; is that right? Dr. BOYD. Well, our present thinking, and this has not been checked anywhere, it is just our present thinking, that we should provide a bonus for new and for increased production. That will mean it will be paid to the miner and not to the smelter; to the miner himself That will bring out new production. Mr. BUDGE. Lead, pretty much, of course, is a combination. Dr. Bord. You have to do the two together; you can't separate them. Mr. BUDGE. You are now going to, as far as you know, maintain the ceiling of 17 cents, and yet you pay a bonus to the domestic producer. Dr. BOYD. That is correct, if the ceiling remains where it is. Mr. BUDGE. Is there any plan to bring the two into parity with the world price, with the bonus plus the ceiling price? Dr. BoYD. That question is under discussion, because it involved—I couldn't speak for the Price Administration, but it is a problem they are trying to face. It is a difficult one to face; it is a problem of stabilizing your economy at home, and what you do about import materials is quite a complicated problem. That is under discussion at the moment. I don't know how we can answer that question. Mr. BUDGE. I think, Mr. Chairman, that is something the committee. should consider. The Office of Price Stabilization when they testified here, said they were going to keep the domestic producers out of the world market. They were going to peg the price of lead at 17 cents, and if they had to pay 30 cents to the foreign producer they would pay it. Now, we have the subsidy for the foreign producer. |