the sack unless these unit quantities are moved upward, they are not going to do it, are they?

Mr. BRADLEY. I would say not.

Mr. ENGLE. Do you mean then, is it a proper conclusion then that this program simply won't get anybody's name on a piece of paper! Mr. BRADLEY. There will be small producers; there might be producers out there that would fulfill all the purposes of this program and some big fellows lag back.

Mr. ENGLE. If some fellow had some high grade that he could deliver and he wasn't bound to deliver any particular quantity, but he would be paid for what he did deliver, then he would be all right? Mr. BRADLEY. That is right.

Mr. ENGLE. But the fellow who had to up-grade in order to get a price under this schedule, which would get him into a safe landing financially, would not be willing to make the capital investment in facilities for up-grading unless he had sufficient quantity so that he could come out over the long haul, would he?

Mr. BRADLEY. That is right.

Mr. ENGLE. The miners say this won't do it. Are they right or wrong?

Mr. BRADLEY. The big miners are right and it is not a matter of interest to the little miner.

Mr. ENGLE. The big miners are right and it is not a matter of interest to the little ones because they will deliver high grade? Mr. BRADLEY. They will get in under it without any difficulty. Mr. ENGLE. Is my conclusion correct that the program won't work then?

Mr. BRADLEY. I don't say you can say unequivocally that it won't work because it will work to some extent, and I dare say

Mr. ENGLE. It will work to the extent that the small miners bring in wheelbarrows full?

Mr. BRADLEY. I daresay these fellows are gamblers enough to proceed in at least a cautious fashion. They won't stop altogether. They will proceed in a cautious fashion on the premise that these figures will be changed and I think you heard here last Thursday, Mr. Morgan saying that these figures so far as the DPA were concerned could be changed within reasonable limits at almost any time. Mr. ENGLE. Is it a fair statement then that these figures have to be changed before we have any reasonable assurance that there will be results from this program?

Mr. BRADLEY. I would say they should be changed.

Mr. ENGLE. Well, now Mr. Mittendorf, let's move over one notch here; will you agree that these figures have to be changed before there is a reasonable assurance that this program will work?

Mr. MITTENDORF. I can't agree to that.

Mr. ENGLE. How are these fellows going to get out on this now! Will you explain that?

What kind of financial acrobatics are they going to go through in which they will upgrade this ore with the capital investment in a mill when you haven't established sufficient quantities which would permit them to recover their capital investment?

CONTENTION MADE BY DMA THAT DEMING DISTRICT MANGANESE PROGRAM IS WORKABLE

Mr. MITTENDORF. They don't have to upgrade it; they can ship on this schedule and based on their ore reserves they should do quite well.

May I read from a letter that I received from the largest potential producer in the Deming area?

Mr. ENGLE. Who is that?

Mr. MITTENDORF. The Haley Mines. [Reading:]

We are prepared to start work immediately in this district and have engineers and several miners at work at present.

A small amount of access road is required for four properties, but all others are fully accessible and certain material and bins necessary for rehabilitation are ready on order.

We await only the adoption of a definite 5-year program in order to immediately proceed with the opening of these properties and we will be ready to start deliveries to the stockpile prior to the completion of the proposed stockpile ore-handling facilities.

Mr. ENGLE. That is a very interesting letter, but he doesn't say anything about price. Doesn't the letter presuppose that both the price and quantities will be sufficient?

Mr. MITTENDORF. He says nothing about price, and in the pursuit of our business, we expect a man-they do it in every case-to justify why they need a price. That gives us the means to make a recommendation that we can stand back of, knowing it will stand up against the wear and tear of examination.

We have nothing like that from these people that are doing the crying. They just say, "It won't work," and the gun goes in your back and there it is.

We are willing to consider any data. We have prepared forms upon which one may justify his needs and describe capital expenditures they are making. We will give full consideration to such facts, but in the absence of them, we use our very best judgment to prepare a schedule which we think will work. At least it is based on tangible data and business principles.

The principle won't change, but if new facts are presented we certainly will consider them.

Mr. ENGLE. Of course, Mr. Mittendorf, I might say here parenthetically that this is precisely the reason I have always supported a differential premium because when you get into this business of trying to fix a price based on somebody's justification of costs, you always have that argument, and whenever you fix a price, if a man has a rich mine, you make him rich, where some fellow who has a 1 percent mine above the price, or below the price that you are paying, he can't fit in and that is why I have always favored, in times of emergency such as these, a differential price system, based upon the whole premium price program.

That is why this whole business is an interminable piece of confusion, but what the Government is willing to risk in undertaking a program like this should depend upon the necessities of the Government as to the procurement of these materials.

82354-52- -37

MANGANESE CONTRACT, THREE KIDS MINE, NEVADA

Now I have looked over this schedule here and I see that on the Three Kids manganese mine near Henderson, Nev., you have a contingent liability of something like $52 million; is that right?

Mr. BRADLEY. I think that is right.

Mr. SAYLOR. You notice the contract for the Three Kids does not become effective until January 1, 1952. It isn't producing an ounce of manganese right now. They talk about completed contract, but the contract doesn't go into effect until January of next year.

They have been talking about that great contract with Three Kids since they have been here, for the past 6 months. If you will read the contract you know it isn't producing an ounce of ore.

Mr. ENGLE. That is right.

Mr. SAYLOR. We are interested in what they are going to do to produce ore now, not 6 months from now or a year from now as we were when this thing started.

PLANNED DOMESTIC MANGANESE PROGRAMS WOULD STILL LEAVE UNITED STATES DEPENDENT ON FOREIGN IMPORTATIONS FOR 85 PERCENT OF

REQUIREMENTS

Mr. ENGLE. Mr. Saylor, this illustrates the proposition that you don't start a mine by turning a spigot on; it takes some time to develop a mine. The anticipated annual production from the Three Kids mine will be about 4.8 percent of the annual domestic consumption.

When you add everything up that they have in all five of these areas that is, the Three Kids mine in Nevada; Butte and Philipsburg, Mont.; Batesville, Ark.; Deming, N. Mex.; and El Paso, Texand if you put the whole business into operation you only have 11 percent of the annual domestic consumption of manganese and at the present time we are importing something like-what is it, 92 or 93 percent?

Mr. BRADLEY. At the present time we are producing only about 5 percent.

Mr. ENGLE. In other words, after you get this whole program, loused up as it is, into operation, we will still be 85 percent or more dependent upon foreign importation, from sources which may be unavailable in the event of an all-out war; is that a fair summary? Mr. BRADLEY. Yes.

Mr. ENGLE. Is that a fair summary, Mr. Mittendorf?

Mr. MITTENDORF. You are referring to these specific programs, not the slag?

Mr. ENGLE. I have added up the five of them and come out with 11 percent of the annual production, or annual consumption; is that right?

Mr. MITTENDORF. I will accept that.

Mr. ENGLE. Which leaves us over 85 percent dependent upon sources which may be unavailable in the event of an all-out war. Mr. MITTENDORF. That is the responsibility of the Supply Division. If Mr. Bradley says the figure is correct, I will accept it.

Mr. ENGLE. Whether you are responsible for it or not, when you start negotiating a contract, your negotiation of that contract should

depend-or your outlining of a program, should depend-to a certain extent upon the necessities of the country; shouldn't it?

Mr. MITTENDORF. That is right.

Mr. ENGLE. Do you consider the fact that after you get all through, and if this thing works, which the mining people say it won't, you are still 85-plus percent dependent upon foreign importation that may be inaccessible?

Mr. MITTENDORF. That is right.

Mr. ENGLE. It seems to me that you would sit down and write a pretty generous program and try to get this thing going under those circumstances instead of dealing with half measures.

Mr. REGAN. Just what do you have in mind in response to that? We are starting off with what Mr. Engle and others say is a half measure to get needed manganese. You have all the information, I guess, that might be available. What do you think will be necessary and how soon should it be done, to get the 11 percent or 15 percent that might be available to us in operation?

Mr. MITTENDORF. Let me say for myself and everybody-Director Boyd-we are very sincere in wanting to establish a good, healthy, sound industry in the West. I am a small miner myself. I believe that the programs that we have proposed, in the absence of definite cost data, will constitute that first step. I feel that we will go on forever, wrangling over individual cases and trying to put things in shape to satisfy everybody. We will never get it done. I believe that we are taking the right approach. We have our eyes open to every piece of valid information and we are willing to consider it; but we must do something now, to start production.

Mr. REGAN. You believe this program as outlined is going to accomplish the objective?

DMA CONTENDS MANGANESE PROGRAM FLEXIBLE ENOUGH TO MEET CHANGING NEEDS AND CONDITIONS

Mr. MITTENDORF. I believe it is definitely the start. I believe that new information will be available subsequently which might justify amendments to the proposed order.

These things are adjusted from time to time to fit the hardship cases, or to fit the needs of the district.

Mr. REGAN. You have heard it stated here that a miner might not feel justified in making the capital investment necessary to bring in the maximum amount of ore. What do you have in mind if that does develop? Do you have in mind adjusting your purchasing scale to bring about the desired result, or are you going to hold to this schedule that you have worked out?

Mr. MITTENDORF. Certainly we wouldn't hold to it. If a man said, "Here is my project; here are my problems; here is the money I have to invest and I can't operate, I can't live under this," naturally you would consider his case and amend the schedules so he could operate. Mr. ENGLE. Is there some reliance upon the initiation of some other program that will take care of this, such as the slag program.

Mr. MITTENDORF. I didn't quite understand your question. Mr. ENGLE. What I can't understand is why you are horsing around here with 11 percent of the domestic consumption, unless either you

don't want a program, or you think something else is going to be done that will bail the country out in the event we get into an all-out war. I am asking, do you have in mind that maybe this slag program is going to do it?

Mr. MITTENDORF. I am not influenced in any sense, or my actions biased, by the slag program. We know we have manganese in these four districts, and we wish to start a healthy industry in those districts. I am not influenced by what the slag program might do.

Mr. ENGLE. What is wrong with a program that would give a producer $1 per unit on 20 percent manganese ore and then scale the price up and down 2 cents per unit on ores failing to meet the 20 percent limitation and then limiting the program also to the receipt of ores which could be upgraded to a usable grade for $2 per unit, exclusive of freight?

In other words, you say, "We will pay $1 for 20 percent ore. We will put a 2 percent premium on and we will refuse to take any ore that can't be upgraded to a usable grade for $2."

What is wrong with that?

Mr. MITTENDORF. Well, the way we operate, we have to give justification when we are recommending the expenditure of the Government funds. We have to justify that the figure is a realistic one; that it is required to bring out the essential production. It is pretty difficult to operate under this Defense Production Act-much worse than it was under the premium price plan.

Mr. ENGLE. Who do you have to justify it to?

Mr. MITTENDORF. We have to justify that this material is not obtainable or available on more favorable terms.

Mr. ENGLE. You are not going to get it at all if you aren't careful. You are talking about justifying to Dr. Morgan over there?

Mr. MITTENDORF. No; I believe that provision is in the act. I think it is under section 303.

Mr. ENGLE. I am familiar with that provision, but you are not getting anything at all now and it has been nearly 9 months since this act was put into effect. What I can't understand is that although we have had the act in effect since September and the Government knew it was going to be passed 2 months before it actually passed the Congress which was on September 8, and down there in the Bureau of Mines and in the United States Geological Survey they were supposed to have all the information in the world about this business, here we are 9 months later, spinning our wheels and getting nowhere, with the miners coming in and saying, "Well, we are being sabotaged again. They put a price on low grade; we can't ship that, and they put a limitation on high grade that will bust us if we try to upgrade it to that level."

Mr. REGAN. Do you do that solely as a matter of budgetary limitatitons, limiting the amount of high grade that you will agree to buy! Mr. MITTENDORF. No, we don't. We asked for the budget which will fit a program we can justify.

Mr. ENGLE. The second basic objection to this program, Mr. Chairman, is that it is limited to a relatively small amount of manganese; the fellow who is going to do the upgrading has to figure on the capital investment for the facilities to do the upgrading, and he says, "Well, look at what I am going to have to work with. When that many units are in I am done, whether my plant is amortized or not."

Mr. REGAN. What is your idea of a justification?