Mr. CHENOWETH. I just wanted to ask Mr. Hardy about the price situation.

You are opposed to the prices fixed in the Senate bill, as you mentioned in your statement. You think they are not justified under present circumstances?

Mr. HARDY. Judge Chenoweth, let me say this: that we feel those prices are not necessary to accomplish the objectives of our stabilization plan.

Mr. CHENOWETH. You feel that a smaller price, then, would be adequate?

Mr. HARDY. I feel that our original prices, which were three-quarters of a cent lower for lead and zinc, and $5 for fluorspar, would accomplish the objectives we had in mind when we formulated the stabilization plan, sir.

Mr. CHENOWETH. Mr. Seaton was up here a couple of weeks ago, and I asked him how violently he would oppose these prices in the Senate bill if we saw fit to include them in our bill and it became law.

What would your attitude be toward those prices if it were the feeling of Congress those were necessary to stabilize the present market? There is just a matter of a very small difference involved here, is there not?

Mr. HARDY. Three-quarters of a cent on the lead and the zinc prices.

Mr. CHENOWETH. If the patient is dying, we should not quibble over whether we are going to give him a red or a blue pill, should we? We had better give him something quickly.

I think I will not belabor the question. We have other witnesses. I think obviously there is a sharp conflict as to how far we should go in this situation.

Mr. HARDY. Judge Chenoweth, I will say it is a minor price difference of opinion.

Mr. CHENOWETH. I beg your pardon?

Mr. HARDY. It is a relatively minor difference in price.

Mr. CHENOWETH. Well, I hope we can get together.

Mr. ROGERS. The Chair recognizes the presence of two of our colleagues from the full committee, the gentleman from New York, Mr. Pillion, and the gentleman from Illinois, Mr. Collier.

Without objection, the gentleman from New York will be recognized for a question. Mr. Pillion.

Mr. PILLION. Mr. Hardy, I appreciate your very fine statement, but it does leave me somewhat puzzled.

As I understand it, there is no intent in this program to build up a military critical and strategic materials stockpile. We already have 2 or 3 stockpiles. Is that right?

Mr. HARDY. That is right.

Mr. PILLION. Based upon our military needs, based upon a formula, and those are completely filled. Is that correct?

Mr. HARDY. That is my understanding, sir.

Mr. PILLION. So that the program is not intended to fill any military prospective need; is that right?

Mr. HARDY. That is true, sir.

Secretary Seaton, in testifying on July 3, said of course this program does strengthen our defense position.

Mr. PILLION. But not in a particular way that we need certain materials for a critical and strategic material stockpile. Is that right?

Mr. HARDY. You are correct, Mr. Pillion.

The purpose of this bill is not to do that. There is no such purpose. Mr. PILLION. There is no shortage of production of materials in this country now. It is not intended to make up any lack of supply of any of these metals?

Mr. HARDY. No, sir.

Of course, one of the problems of the base metal industry is oversupply in the free world.

Mr. PILLION. That is right. So we do not have any undersupply; so that we are trying to build up a capacity, because we already have an overcapacity. Is that correct?

Mr. HARDY. At the present level of consumption, Mr. Pillion, there is an overcapacity of production.

Mr. PILLION. Yes.

Now, is this program intended to keep marginal mines open on a standby basis or possibly some other basis?

Mr. HARDY. No, sir. This program is intended to bring out certain productive levels of domestic production in this country at fair and reasonable prices. Those levels are based upon the historical share of the domestic market for the domestic producers.

Mr. PILLION. Is the program intended to relieve unemployment in various areas of the country in the mining industry?

Mr. HARDY. We feel that a program of this nature will certainly help in the unemployment situation in the mining areas, sir.

Mr. PILLION. Could we perhaps have a case-by-case listing of the unemployment in the areas and what the prospective relief of that unemployment might be under these bills? Is this program intended to shore up or to bolster up mining corporations that are in bad financial straits?

Mr. HARDY. No, sir. The primary purpose is the maintenance of productive capacity in this country. We do have figures that show domestic production, say, of lead and zinc is down from what we consider normal some approximate 30 percent. We would like to restore that decrease.

Mr. PILLION. Actually, the mining corporations, or most of the large ones, are in very good financial shape. Their profits are very high in relation to their investment capital compared to other industrial corporations. Is that not correct?

Mr. HARDY. Not necessarily for these commodities, sir. Of course, individual companies would vary.

Mr. PILLION. I wonder if we could have a list of the large producers, say, of roughly 80 percent of the production of these various metals, together with a listing of their profits based upon investment capital in the past 5 years.

By the way, Fortune magazine this month contains a listing of the profit on investment of 500 large industrial corporations, and it includes a number of metal corporations, and they have done very well. So could we have a picture of the financial situation so far as the corporations are concerned in the various metal and mining fields?

Mr. HARDY. Mr. Pillion, this would be a rather difficult thing for us to do.

Mr. PILLION. I know, but it is a difficult program and involves about $600 million. That would be the sort of basic information upon which the Members of Congress could exercise their best judgmentMr. HARDY. Surely.

Mr. PILLION (Continuing). With a background of information.

Mr. HARDY. We are faced with this rather difficult situation of breaking out the mining aspects of a complex and oftentimes integral producer of these metals, and I am not sure whether we would have those figures or not. We will try.

Mr. PILLION. I would appreciate it if you could get them.

Another listing that might be of value to the Members of Congress in considering this matter is a listing of the imports of all of these metals, and how many of those mines are owned by United States corporations; that is, the metals contained in this bill, case by case, and the price at which the imports are purchased here in this country. It is just background information that might be of some value to the members of the committee.

Mr. HARDY. We will try.

Mr. PILLION. Thank you very much.

Mr. ROGERS. Mr. Collier, do you have any questions?

Mr. COLLIER. Not being a member of the subcommittee, Mr. Chairman, I am just going to be a good listener.

Mr. ROGERS. Mr. Berry, do you have any questions?

Mr. BERRY. No questions.

Mr. ROGERS. Thank you very much, Mr. Hardy.

The Chair has indicated, in view of the situation that has developed, that the industry representatives would begin with Mr. Clyde L. Flynn, Jr., Independent Domestic Fluorspar Producers Association. Mr. Flynn, if you will take the witness stand, please.

Mr. DAWSON. Mr. Chairman, could you give us any indication of the allocation of time for these various witnesses and the plans of the Chair in lining the hearings up?

Mr. ROGERS. Let the Chair say this: that the Chair admonished the witnesses that time is of the essence in this and suggested that the statements be as brief and concise as possible. The Chair would certainly permit the insertion into the record of written statements and make the record complete on this subject, but he has not placed any limitation of time on the witnesses, hoping that they would cooperate. If they do not, of course, a time limitation will be imposed.

Dr. MILLER. May I inquire of the witness, he has 10 pages here. Is it possible to sum it up!

STATEMENT OF CLYDE L. FLYNN, JR., REPRESENTING THE INDEPENDENT DOMESTIC FLUORSPAR PRODUCERS ASSOCIATION

Mr. FLYNN. Yes, sir; I had intended to just summarize the statement and let it go in the record.

Dr. MILLER. Thank you.

Mr. ROGERS. Mr. Flynn, do you desire this entire statement to be inserted in the record?

28972-597

Mr. FLYNN. If it could be; yes, sir.

Mr. ROGERS. Without objection, it will be inserted at this point in the record, and you may proceed, Mr. Flynn.

(The statement follows:)

STATEMENT OF CLYDE L. FLYNN, JR.

Mr. Chairman, and members of the committee, my name is Clyde L. Flynn, Jr. I am vice president of the Hicks Creek Fluorspar Mining Co. My address is Elizabethtown, Ill. I appear here as a representative of my own company and also on behalf of the Independent Domestic Fluorspar Producers Association. This group produces approximately 75 percent of all fluorspar produced in this country. We have no members who own or operate fluorspar mines abroad, our interest is in the continued production of domestic fluorspar, and the maintenance of a healthy domestic industry.

I appreciate the opportunity of appearing before you for the purpose of commenting on the several bills you have before your committee to stabilize production of copper, lead, zinc, acid-grade fluorspar, and tungsten. I shall confine my remarks to only one of the minerals-fluorspar.

Before proceeding with my observations on the pending legislation, I should like to briefly explain what fluorspar, a little known but extremely important mineral, is and some of its uses. The specimens of fluorspar which you have give some indication of its physical characteristics. Fluorspar usually occurs in limestone or granite formations. Occurances are noted in 15 States. There is production today in only five States; Colorado, Montana, Utah, Kentucky, and Illinois. There may be some small production in Nevada. The potential in the Western States is great, and given some assistance, production could become substantial.

Flourspar is produced in three grades: Metallurgical grade which is in gravel form and is essential to the production of steel; acid-grade fluorspar which is highly refined by flotation benefaction and in its commercial form is finely ground. Acid-grade fluorspar is essential to the production of aluminum, atomic energy, hydrofluoric acid, freon gas, high octane gasoline, and is the commercial source for fluorine in the chemical industry. Fluorine as you may know is the most promising oxidizing agent for the fuels for our rockets and missiles. Ceramic grade fluorspar is produced in the same manner as acid-grade fluorspar, but not refined to such a high degree of purity; it is used in the glass and ceramics industry.

For the past few years independent domestic production of fluorspar has been almost completely dependent upon Government purchase programs. Two captive mines produce acid-grade fluorspar for their own consumption. Domestic producers for years have been wholly unable to compete with low priced imported fluorspar which, incidentally, is produced for the most part in plants financed by the United States Government, as was clearly demonstrated by recent testimony of importers before the Senate Committee on Interior and Insular Affairs.

The legislation proposed by the Secretary of the Interior provides for a price of $48 per ton f. o. b. Rosiclare, Ill., for acid-grade fluorspar, with a maximum stabilization payment of $8 per ton. No provision was made for metallurgical grade fluorspar production. The legislation reported by the Senate Interior Committee in S. 4036 and also incorporated in several House bills now before this committee provide for a price of $53 per ton for acid-grade fluorspar and a maximum stabilization payment of $13 per ton, with no basing point.

In attempting to determine whether this price of $53 per ton with a $13 per ton stabilization payment would work for the fluorspar industry, it is necessary to have some information concerning the consumption centers for acidgrade fluorspar, the price for which imported material both acid grade and metallurgical grade fluorspar is available at these points, and the price for which domestic producers must sell in order to be competitive. I will also provide some representative cost of production figure for the domestic industry. With such information this committee, I believe, will conclude that a greater differential payment must be provided and that metallurgical grade fluorspar should be included in the pending legislation, if the domestic fluorspar industry is to receive sufficient assistance to enable it to survive.

First, as to the principal consuming centers: 2 are located on the east coast, 1 at Cleveland, others are East St. Louis, Ill.; Nichols, Calif.; Joliet, Ill.;

Houston, Tex.; Bauxite, Ark.; Calvert City, Ky.; and Baton Rouge, La. The consumer at East St. Louis furnishes practically all of its requirements from its own domestic mine and the one at Calvert City furnishes part of its requirements from its own domestic mine.

Foreign acid-grade fluorspar far in excess of domestic requirements is available at prices greatly below domestic cost of production. One hundred thousand tons of Italian acid-grade fluorspar annually is available to consumers at a price of $35 per ton plus $1 per ton stevedoring, on the east coast, gulf coast, and at Montreal, for Cleveland consumption. One hundred and seventy thousand tons of Mexican acid-grade fluorspar, part of which is now available, the balance of which will be available by April of 1959 after barter contracts have been concluded, is offered at a price of $40 per ton, duty paid at all border points. Using last year's imports of 420,000 tons of acid grade fluorspar (nearly 100,000 tons in excess of domestic consumption) as the total figure, then an additional 150,000 tons will be available at slightly more than $40 per ton. Furthermore one foreign producer (p. 902, Senate Interior Committee hearings) advised the committee that he is in the process of increasing his production from 50,000 to 100,000 tons per year.

Hence, we have a situation where imported acid-grade fluorspar is available to consumers on the east coast for $36, plus $4 per ton for drying, to be competitive with which domestic acid-grade fluorspar must sell for $22.62 per ton f. o. b. Rosiclare, Ill., the nearest domestic source. Evidently a stabilization payment of $30.38 would be required in this instance to be competitive. At Cleveland, a differential of $23.09 would be required. Considering now consumers who are closer to Rosiclare, Ill., we would require a stabilization payment of $17.73 per ton to be competitive at Joliet, Ill., and $16 per ton to be competitive at Calvert City, Ky., only sixty-odd miles from Rosiclare. These stabilization payments are calculated on the basis of a $53 per ton domestic price.

Turning now to Colorado production. From Colorado, the producer must look to Joliet, Houston, Bauxite, or Baton Rouge for an outlet for his acid-grade fluorspar, these being the nearest consuming centers. To be competitive at Joliet a stabilization payment of $26.50 per ton would be required. In order to sell at Houston where foreign acid-grade fluorspar is available at $49.04, a stabilization payment of $17.71 is necessary. At Baton Rouge, Mexican ore is currently selling for $51, but this price obviously cannot stand; a stabilization payment of $18.91 would equalize the prices, but this differential cannot meet the new Italian price. At Bauxite, Mexican ore is delivered for $51 leaving a $15.22 advantage for the importer, but here again the price must decline sufficiently to meet Italian prices when new contracts are negotiated.

I believe the above should make it abundantly clear that domestic producers simply cannot compete with imports for even a fraction of the market if a stabilization payment of only $13 per ton is provided for acid-grade fluorspar.

I should like to turn now to the cost of production of domestic acid-grade fluorspar, and the relationship between costs and $53 per ton. I will use as an illustration, mine A, in Illinois. This mine currently obtains about one-half of its crude ore from small producers, 4 to be exact, which have a total employment of about 200 men. The purchase price for crude ore is on a unit basis, that is to say, so many cents per unit of calcium fiuoride contained, and the current rate of pay is expected to continue through the balance of this year. Current shipments average 55 to 65 percent. Using 60 percent, the delivered price to the mill is $18 per ton of crude ore (30 cents per unit for this grade). The average recovery in milling is 80 percent. Two tons of crude ore would just produce, with luck, 1 ton of acid-grade fluorspar for which we would receive $53, under the proposed legislation. Against this we would have $36 for crude ore, $7 for milling, $2 for drying, $1.25 for truck hauling to railroad, $3 for administration, including professional staff, which is not carried in mill costs, for a total cost of $49.25. This would leave a gross profit before taxes, etc., of $3.75 per ton, hardly sufficient to encourage anyone to risk his capital in fluorspar mining.

Mine B in the same area has a purchase price scale within 1 cent per unit of mine A. It should be kept in mind that mines having mills pay less, as a rule, for custom ore than the cost per unit of their own production. The Colorado mines have a cost of about $48 per finished ton of acid-grade fluorspar. It does not seem necessary for me to say that domestic acid-grade fluorspar producers, with these costs, could not be expected to produce at Secretary Seaton's proposed price of $48 per ton, that I believe is readily apparent.