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larly of the Senate, is having upon the departments in Government, if you are being exceedingly cautious, because somebody might put the old spyglass on you and dig up something and make a headline out of it.

I am just wondering if you are being that much more cautious about every move. Didn't you feel that you had a little freer hand in World War II to go ahead and deliver on a program than you do now?

Dr. BOYD. I can't deny that, Mrs. Bosone. That is perfectly true. that you have to be careful on account of this: we should as Government officials anyway. One of our difficulties in this problem is the question of appropriation, how much money can be made available for these particular programs. For instance, we now have to go before the Congressional Appropriations Committee and obtain an appropriation of $95,000,000 for this tungsten program alone; although we may never spend a penny of it, it will have to pass through that procedure. Last time it was put out in a pretty blanket fashion. When we are talking about a difference in opinion of premium prices, I think we are agreed on one point. Where we have to get metals, in addition to what the normal economic forces would bring out, we are going to have to pay moderate prices in those particular areas. There is no question about that in my mind. This is just a question of how you go about doing it, whether you do it on a blanket basis, or what we refer to as the premium price plan.

It is only the mechanism that I am quarreling with. I think we may even be close together on that point. We want to make this thing so it is a really firm, substantial program working for a long range and make this a strong mining and mineral-producing program in this country.

We are faced with the inflationary costs of metals overseas and this puts greater emphasis on the fact that we must have our own production in this country. What we need to do is to develop a firm and long-term program to strengthen our own domestic industry. Mrs. BOSONE. Then your attitude is a little different on this program than in World War II. You jumped into that overnight.

Dr. BOYD. That is true.

Mrs. BOSONE. And you are not jumping into this overnight.

Dr. BOYD. We are trying to do a job that will last and do it the best way possible. The premium price plan as it, worked before indicates that perhaps we didn't get maximum efficient production out of that program. We would like to do a little better job this time. I think

we can.

MANGANESE CONTRACTS FOR THE BUTTE-PHILLIPSBURG AREA BEING

NEGOTIATED

Mr. REGAN. Let's have order here. One of the gentlemen has been waiting to be heard since before Mr. Murdock's statement on the program. We should hear from Dr. Boyd later on in a full discussion of that. But at the present time the Chair will recognize Mr. D'Ewart, who has been waiting patiently to be heard.

Mr. D'EWART. I would like to get away from the premium price plan and get down to a few specific instances.

First, early in the day you made some statements with regard to manganese, the supply is even with the amount being used at the present time.

Dr. BOYD. The flow of manganese in this country is in excess of the utilization.

Mr. D'EWART. These plans for the production of manganese, will

it be treated in Butte?

Dr. BOYD. Yes.

Mr. D'EWART. I believe the Government owns one plant there now, is that not correct?

Dr. BOYD. That is correct. We are entering into negotiation with the gentleman that runs that plant to treat the ores from Butte and Phillipsburg.

Mr. D'EWART. And those contracts are available and will be under operation within a week, I believe you say.

Dr. BOYD. We finally got agreement with the companies on the form of the contract. Now, that has to be recommended to DPA for certification.

Mr. D'EWART. They are up to DPA?

Dr. BOYD. No, they haven't gone over yet.

Mr. D'EWART. They haven't?

Dr. BOYD. No, we haven't had a chance to turn the agreement into final form of the contract. What we are attempting to do is work up the final details of the contract before we sent it to DPA so we can save time. Then the orders come back and we renegotiate afterward.

Mr. D'EWART. You have reached an agreement with the companies? Dr. BOYD. That is right.

Mr. D'EWART. Then the next step is for you to process that agreement and then send it up to the next agency?

Dr. BOYD. That is correct.

PREMIUM PRICE PLAN OF WORLD WAR II AN EFFICIENT METHOD EVIDENCE SHOWS PLAN ENCOURAGES MAXIMUM PRODUCTION AT LEAST UNIT COSTS

Mr. ENGLE. Before we leave this matter of premium price plan, I would like to put something in the record, if you don't mind. It is just for this purpose: I don't want to let the statement go unchallenged that the premium price plan is inherently inefficient. I think there may have been some chiselers, a few of them, but there are in every program, but on the whole, it is practically impossible for a man to mine out his low grade and leave his high grade. It can't be done in a mining operation in the ordinary sense and there are practical miners sitting in this audience who will tell you that, but in addition, the premium price plan provided that the miner's margin of profit decreased as his costs went up and as a consequence there was an automatic control in the plan, itself, on any effort, because as soon as his cost went up, his margin profit went down, and I want to put in a table which shows that to be true and gives the actual margins. It appears on page 135 of a report of the Senate Small Business Committee, Senate Subcommittee Print No. 8 of the Seventy-ninth Congress, second session, entitled "Premium Price Plan for Copper, Lead, and Zinc." It is with particular regard to small and marginal mines, printed February 1, 1946, under Senate Resolution 28.

I would like to have that in the record at this point.

(The material referred to is as follows:)

OPERATING MARGINS ALLOWED UNDER FORMER PREMIUM PRICE PLAN FOR COPPER, LEAD, AND ZINC

OPERATING MARGINS FOR LEAD-ZINC MINES

In the period before the authorization of B and C and special copper premiums, the business of the committee had been almost solely with the larger mines which had long operating histories. Form 1572, which was used by these concerns in applying for quota revisions, called for data on costs, revenues, and production which enabled the analyzing engineer to determine the operating margin for some period in the past. In the calculation of a quota for the future, it was the practice of the committee to select from this past record what appeared to be a normal operating margin under which the concern could operate comfortably. Cash out-of-pocket margins only were considered, the committee taking the position that allocation of these to depreciation, depletion, dividends, income taxes, and surplus were matters of corporate policy into which the committee was not authorized to intrude.

The tri-State area had been an exception to this method. The large number of mines in that district and their relative homogeneity as to type of deposit, mining methods, and costs had led to tabular analysis of historical operating margins of some 75 of the mines. From this a pattern had been developed of margins varying in general with the grade of ore. It was an easy step to a scale of standard margins, which with the cognizance of all concerned was placed on the high side, since it was considered sound policy that a maximum exploitation rate in the tri-State should be encouraged by broad margins.

The method of selection from past record worked reasonably well for western mines until the higher premiums brought in applications from concerns with no operating history. Long discussion arose as to the proper margins to be used in the calculation of quotas. Finally, on June 16, 1943, the committee adopted a set of principles, as follows:

"We observe the principle that higher operating margins per pound of metal should be reckoned for mines with lower costs per pound of metal produced, with additional consideration for land and mill ownership.

"With respect to mines with relatively stable, substantial operating history we give weight to margins obtained during the last few years from similar grades of ore. In the case of a few large concerns for which operating conditions have not changed materially we give due consideration to the OPA base period of the years 1936 to 1939, inclusive.

"For mines with little or no operating history and probably erratic future production we use a contingency factor expressed as a percentage of the variable costs per ton of ore which are a function of the deposit, and which indicates our appraisal of the hazards of inaccurate estimation, fluctuations in costs and grades of ore, and the like. In general, this factor is large for smaller mines." This set of principles was then translated into a scale of margins in cents per pound of zinc-equivalent metal, calculated according to rule 13, lead and copper being reduced to zinc equivalent in proportion to the ceiling prices of the three metals. This basic scale was intended to apply to lessees paying royalty as an operating cost and shipping crude ore to market. For landowners operating their own fees, the scale was increased by 50 percent. In the case of an operator paying royalty to apply on the purchase price of property, the same 50-percent increase for land ownership was applied, but royalties were not considered an operating cost. For operators with mills certain flat sums were added to the margin per ton of ore, the sum varying with the type of mill. In recognition of the necessarily erratic course of operations at smaller mines, multipliers were assigned for mines up to 5,000 tons per month, with top limits varying from 40 cents to $1.20 per ton of ore. This scale was intended to apply to simple ores of lead and zinc, or complex ores of copper, lead, and zinc. It did not apply in general to copper ores. A copy of the scale and the work sheet used in its application appear on pages 134 and 135.

The lead-zinc scale seems to have proven almost completely workable. It has been found, however, in the case of certain very low-grade ores that the mill allowances weight unduly the final margin. Recently the committee has adopted as a tentative rule in this matter-"that the mill factors we use he applied without modification to those ores of a recoverable grade such that the mill factor is no more than one-half cent a pound of zinc-equivalent metal calcu

lated according to rule 13, and that in ores of lower recoverable grade the factor be calculated at one-half cent a pound of rule 13 zinc equivalent."

The tri-State scale, which prior to adoption of the western scale had not included mill or ownership factors, was revised to parallel the western scale. A copy of that scale is also in the appendix hereto.

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MARGIN SCALE TABLES, FORMULAS, AND CHARTS

The two following pages show the front and back sides of the work sheet used in calculation of margins for ores other than copper or Tri-State. Between the time of preparation of the main body of this report and its issuance this work sheet was revised to reflect a new table of small mine factors adopted by the Quota Committee. This new table, while having the same top and bottom limits as the old one, has more and smaller intervals. The sample calculations of the "Queen Alice" and "Carlton" mines used factors from the old table and therefore the factors used in those calculations do not correspond exactly with those which would have been taken from the new tables.

OPA Forms 679-429 (revised)

WORK SHEET

Metal Mining Analysis Office

ZINC-EQUIVALENT MARGIN CALCULATION

For Simple Lead or Zinc Ores or Complex Lead-Zinc-Copper Ores Produced From Districts Other Than the Tri-State

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(Clip one penciled copy only with the typewritten copies of each recommendation

of the Quota Committee)

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Operating margin per ton (or pound), western United States mines, determined in

relations to cost per pound

[Before allowance for ownership of mine, mill, or plant]

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1 Recoverable metal as defined by rule 13 except that 1 pound of recoverable copper be regarded as 1,5 pounds of recoverable metal and 1 pound of recoverable lead be regarded as 0.8 pound of recoverable metal.

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