EXHIBIT G.-Statement of machine tool lease contracts, as of June 30, 1953-Con. 1 All machines were acquired under the contract. Remaining funds are authorized for additional costs, if any. 2 Indicates the amended number of machines and value under the contract after applying proposed amendments by DMPA providing for a decrease in number of machines and value. EXHIBIT H.-Statement of elephant machine tool contracts, as of June 30, 1953 Nicaro is a unique operation of the Federal Government. Located in Cuba, the plant is one of the large nickel producers of the world. Its output of strategic metal is being produced for the Government's account, in effect, without a subsidy. Out-of-pocket expenses-commonly considered direct operating costs-have been paid in full with the receipts from the sale of nickel. In fact, sales have produced sufficient operating income to cover about 90 percent of the amortization charges on the books of the General Services Administration. In addition to the revenue from nickel sales, the Government has benefited from stockpile purchases of Nicaro nickel at less than market prices. The sav ing approaches $725,000 and more than offsets the operating deficit reported in the income-and-costs statement, set forth later in this report, which takes into account all operating costs and income. Ore royalties, one of the major operating costs, are being returned to the Government, moreover, in the form of dividend and redemption payments on preferred stock which represents part of the Government's original investment in Nicaro. Originally constructed for operation in World War II, the shutdown, surplus industrial facility was brought into production in 12 month. By the end of fiscal year 1953, the plant had had nearly a year of full operation in its second tour of duty for the United States. In that year, the output measured up to 26.158.000 pounds of nickel. Near the end of the period production was averaging about 27 to 28 million pounds on a yearly basis. This appears to approximate the plant capacity with its present process and equipment, both of which are under thorough-going study, although both the first and second operations were initiated with higher expectations. Twice when the security of the United States has been at issue Nicaro nickel has helped the Nation meet critical deficits in the vital armament metal. The role of Nicaro in national defense has received far-sighted recognition by the Senate Committee on Armed Services. Its Preparedness Subcommittee, in its fourth report, Nickel, submitted late in 1950, proposed, in fact, that the policies governing reactivation and operation should be aimed at eventually establishing the facility upon a permanent, commercially profitable basis. Successful attainment of this goal would ward off repetition of the crucial nickel shortages of 1941 and 1950. For the support of its overall proposal, the subcommittee pinpointed recommendations spelling out the urgency of rehabilitating the plant, improving its efficiency, and going forward with justified plans for expanding its capacity. The recommendations have formed a lineprint which has guided the second operation of Nicaro in all its phases. The Preparedness Subcommittee goals continue to be the target for Nicaro. The first year of full operation points hopefully to a successful transition from Government operation to private enterprise. In the meantime, the subcom mittee's thoughtful expansion proposal is under careful consideration. The plans which are guiding the expansion study to its conclusion take into account Nicaro's economic roles in Cuba and the United States as well as the continuing need for nickel as a strategic metal for the defense of our Nation. The Nicaro operation is described in some detail in this report. It reviews the first operation, sketches the problem of the surplus years, and then presents a step-by-step accounting of the second run from the initial search for a qualified operator up to the end of the fiscal year which coincided with the end of the first 12 months of full operation. NICARO TODAY The Nicaro nickel plant in Oriente Province, Cuba, is in its second tour of duty for the United States. It has been in production for 18 months, in full operation for the last 12. United States-owned, it has a unique position in the Nation's arsenal of defense by virtue of its location in a foreign country. The official owner is the Cuban Nickel Company, a wholly owned Government corporation organized under Cuban laws. A surplus war plant, Nicaro was shut down in March 1947 after 40 months of production, primarily for the war against fascism. It was brought back into operation in January 1952, nearly 5 years later, to help arm the United States against the threatening expansion of communism. Reactivation has been guided toward goals set by the Preparedness Subcommittee of the Senate Committee on Armed Services. The subcommittee recommendations pointed to the resumption of production as an immediate target. Permanent, profitable commercial operation, possibly with expanded capacity, was the envisioned long-range goal. These views were embodied in four specific recommendations: For the earliest possible reopening improved efficiency, research, and expansion. The first two have been carried out. An effective research program is underway and has yielded rewarding results, particularly a new process for product improvement, Lastly, expansion is under positive consideration, and preliminary phases have been executed, particularly the development of greater ore reserves. Renewed production was necessarily preceded by a year's intensive rehabilitation and improvement. This work continued after the startup as the huge metallurgical plant, heart of the Nicaro operation, was advanced stey by step to the full operation. This was attained in July 1952. In its second run, Nicaro has produced 31,220,818 pounds of nickel through June 1953. Most of the production has flowed from the plant since full operation was reached. In these 12 months the plant has delivered 26,158,250 pounds for industrial and stockpile uses. In the closing quarter of this period, the plant was producing at the rate of 27 million pounds a year, and the June output was equivalene to an annual rate of 28,300,000 pounds. These figures, in comparison with the pioneer operation, indicate that a higher level of output has been reached. This has been made possible primarily by an improvement in the rate of recovering nickel per ton of ore. Higher rates of production and recovery demonstrate the gains in efficiency which have marked the second run. Financially, Nicaro improved its income-and-cost position in the second run. For the 12 months of full operation after rehabilitation, the excess of costs over income was about $250,000. Nicaro's operating deficit was approximately 2 percent of all costs, including amortization charges for the retirement of the capital investment during the life expectancy of the ore reserves which have fed the plant. In comparison, the first operation's 40 months ended with a deficit of about $3 million without allowance for capital costs or payment of ore royalties. In terms of immediate out-of-pocket costs, the second operation is paying its own way. The project, moreover, has supplied the Government stockpile with nickel at a savings of $725,000 under its cost at market prices. Nicaro was the source from which the Government received revenue in addition to an dseparate from the operation receipts from nickel sales. For the fiscal year coincident with the first 12 full-operation months, it amounted to $775,000, consisting of $275,000 in dividends on Government-owned preferred stock in the Nicaro Nickel Company, owner of the ore reserves, and $500,000 for retirement of 5,000 shares of the stock. The total payment approximated ore royalties which the Government paid the company in the second operation through September 1952. |