own the land nor did they have any holdings except the right of the lessee under a lease.

Certainly, I think that the language could be written, if there was some way that you could apply the known methods of geophysical exploration to your industry.

Can you tell us what the situation is in that respect, Mr. Eichelberger?

Mr. EICHELBERGER. I grant you the geophysical exploration in mining has not been very successful. I could name those different kinds that have been tried.

Science marches rapidly. Maybe tomorrow they will find something. For instance, we did not want uranium many years ago. I remember when I had some uranium in a little property and I had a lot of trouble selling it. I sold it for chemicals. The Geiger counters came in. We have the fluorescent lamp. Those may not be geophysical methods, but they are new prospecting methods.

I have tried a lot of them and have had a lot of failure. They may

come tomorrow.

I would like to interject one other thought here. You put a stable price on a metal for a certain district or a certain mine. Let us be specific. Let us say we put a price on a certain property for 25 cents for copper. You will guarantee that price. The Government will guarantee it for a certain number of years. That person or persons who are doing that can take that to a bank now and get money on such a thing, if they have a prospect which looks reasonable.

Mr. BARRETT. It seems to me that the problem confronting the Congress and the people of the country is how can we develop mineral supplies for our own security here in this country. It seems to me under the testimony before this committee, that we are spending a great deal of money under the ECA, obviously, to accomplish that purpose. We are getting exactly nowhere.

If we are going to spend the money, it would seme to me that we ought to center our talk on how to achieve some results that would be available under the worst possible conditions. The munitions people tell us that they do not think it is advisable to depend upon some supply unless, one, it is available to us in a period of emergency by rail transportation, or certainly by water transportation from maybe some points in South America. That being true, it seems to me you have eliminated everything except our own resources here in this country, and I quite agree with the witness that certainly science will be able to use the present developments along geophysical lines in these particular kind of ores that we are discusssing here, and that sometime in the future they will be able to discover these hidden ore bodies by that process.

I do agree with my colleague from Montana that it would be well to write language in here that would encourage that study. I assume you would agree with that statement?

Mr. EICHELBERGER. Very much.

Mr. LEMKE. Mr. Chairman.

Mr. ENGLE. Mr. Lemke.

Mr. LEMKE. May I ask you first, this bill is for national defense, is it not?

Mr. EICHELBERGER. That is my understanding; yes, sir.

Mr. LEMKE. The appropriation compared with the 14 or 17 billion the Army and Navy asked is almost insignificant; is it not? Mr. EICHELBERGER. Pocket money.

Mr. LEMKE. When we spend that 17 billion we want some methods by which the boys could do the fighting, and the means by which ships that take to the air and those that go under the water and above the waves have some means of repelling the enemy.

Can that be done without a sufficient stock pile?

Mr. EICHELBERGER. No.

Mr. LEMKE. In order to have a sufficient stock pile, you also have to have a healthy industry back of it continuing to replenish that stock pile in the time of danger.

Mr. EICHELBERGER. That is well put.

Mr. LEMKE. It seems to me that it is not an incentive payment the Government is making. It is an investment in national defense under this bill.

Am I right or am I wrong?

Mr. EICHELBERGER. That is a rather new way of looking at it, but I must agree with you.

Mr. LEMKE. It is an investment in self-preservation and selfpreservation is the first law of nature. I think it is about time it becomes the first law of the various departments of Government and of Congress, too.

Mr. EICHELBERGER. I agree with that, too.

Mr. LEMKE. I am glad and wish to thank the Member from Montana and my friend over here for having brought out the fact there are some things in this bill that perhaps are uncovered and that we should at least, when the time comes, consider those carefully.

Thank you.

Mr. ENGLE. Any further questions?

Mr. MARSHALL. I would like to ask Mr. Eichelberger one question. I assume from something that you said a while ago that one of the handicaps in getting out ore and finding ore was the lack of proper financing.

Mr. EICHELBERGER. Definitely.

Mr. MARSHALL. You feel this bill is inadequate and all of these bills are to completely solve the problem of adequate financing.

Mr. EICHELBERGER. I would say this: This bill is a long step forward, Mr. Marshall, but it is not the whole answer. I think that is appreciated by all of you. I recognize the Bureau of Mines has done some grand things in their explorations and aid to explorations. I think the small sums of money which have been spent for them have been repaid many times in taxes from mines which they helped to develop, but I think there should be some method-I do not know whether it should be the repeal or the softening of the SEC Act where it applies to a fellow who goes out and wants to sell some stock to a friend to help develop a prospect, or whether it should be with the RFC authority to loan as they did during the last war.

I agree so much with Mr. Lemke. This is pocket change compared to what might help or might hurt if a war is to come. I do not come from a fighting family, but I cannot get anything else but that we are preparing for a definite time in the future, but a definite time when we may have to defend the way of life which we are now enjoying, and

we should not allow ourselves to be chinchy or impecunious, saving a few thousand or even a few million dollars at this time.

I think Mr. Petermann's testimony should be taken and read by every one of you. of that enormous copper deposit which was opened and ready for exploration and had to be shut down and lost forever.

Mr. MARSHALL. War is one thing and national emergency is one thing, but our domestic economy can be well protected, our people can have better living standards if we have some of these metals that are strategic for our own use, too.

Mr. EICHELBERGER. Exactly.

Mr. MARSHALL. That could be a very long time proposition. We might think in terms of a short period of 6 or 7 months on the basis of war, but when we think in terms of the economy of our people, that could go on for a long time, it would seem.

Mr. EICHELBERGER. Generations.

Mr. MARSHALL. Very likely some of these materials will be things that will be needed for our people for peaceful means as well as war

means.

Mr. ENGLE. Are there any further questions?

(No response.)

Mr. ENGLE. If there are no further questions, thank you very much, Mr. Eichelberger.

Mr. EICHELBERGER. May I read something that has just been handed to me?

Mr. ENGLE. Yes.

Mr. EICHELBERGER. I do not like to speak about personal things, but I would like before this is finished to file a statement about certain properties which are being very adversely affected, or would be helped greatly, if this law were passed, properties in which I have no financial interest at all, but which I am consulting engineer for.

Mr. ENGLE. We will be glad to have your statement on that and it will be made part of the record.

Thank you very much for coming before the committee. We appreciate your coming down from New York to do that.

Mr. EICHELBERGER. Thank you very much, sir.

Mr. ENGLE. The next witness will be Mr. Maury.

Mr. Maury, are you prepared to testify?

Mr. MAURY. Yes, sir.

STATEMENT OF JESSE L. MAURY, MINING ENGINEER

Mr. ENGLE. Will you state your full name, sir, whom you represent, and in what capacity you are appearing?

Mr. MAURY. Yes, sir. I have a prepared statement which will cover those points.

Mr. ENGLE. Very well. Do you have copies of it?

Mr. MAURY. I do; yes.

My name is Jesse L. Maury. I am an independent mining engineer. In volunteering this statement, I am not acting on behalf of anyone else.

My experience in the mining industry includes graduation from the Massachusetts Institute of Technology, 7 years in western mining operations, 2 years mine-valuation engineer for the Securities and

Exchange Commission; 4 years with the Lehman Corp., an investment trust; 4 years Director of Metal Mining Analysis in the Office of Price Administration; and 2 years as a consultant.

My work has taken me into most of the major mining districts of the country. What I have to say on this bill applies in general to copper, lead, and zinc mining. I am not an expert in other fields. I will begin with a discussion of what, in my opinion, will be the main effects of this bill.

EXPECTED EFFECTS

The overarching effect of this bill will be to stabilize the market for the output of our domestic marginal ores. From this will flow several corollary effects, thorough extraction of ores, efficient extraction of ores, increased exploration of ores, weakening of pressure for higher metal prices, retardation of the growth toward monopoly, stabilization of the market for marginal output.

Marginal output is not confined to a certain group of mines. What it is depends on price and cost relationships at any particular time. In 1932, because of low prices, probably 75 percent of our mining capacity was marginal. In early 1946, due to rising costs and fixed price ceilings, probably 65 percent was marginal. At present, with high metal prices, I doubt that 5 percent is marginal.

Further, within most ore deposits, variations in grade of ore cause a part of them to be marginal at any particular time. This causes selective mining on an intense scale in periods of low prices and, conversely, mass mining in periods of high prices.

This bill establishes an agency to pay money to any mine operator who finds that his production costs and grade of ore do not allow an adequate profit margin at metal prices as of the time of payment. Under open-market conditions, the ordinary operating calculation is, at present metal prices, what grade of ore can be mined to make a profit?

Under this bill, the operator will calculate the costs of extraction of his average grade of ore and present an estimate of those costs and of the revenues to be obtained from the market. The Administrator will then authorize payment to bring the revenues up to where an adequate profit will be obtained by mining the average grade of ore. This is a complete reversal of the ordinary market logic, and will result in stabilized income for all marginal output.

Thorough extraction of ores

This opportunity to mine any ore deposit at its average grade will have the same effect as continued high prices; that is, mass mining on a wide scale. Low grade can be taken along with high grade in one continuous operation. Remnants, which may be in some cases most of the ores in a deposit, will not have to be left.

Efficient extraction of ores

Much has been said of the tendency toward inefficiency inherent in subsidization. Such statements overlook that, given the opportunity to plan operations for several years without fear of falling prices and the opportunity to mine ores in mass, the incentive would be strong to make investments necessary to operate at maximum efficiency

and to extract ores completely. The record indicates that on balance the latter tendency is by far the stronger.

During the years 1932, 1934, and 1935 a subsidy system such as is proposed by this bill was in full swing. During that time mines receiving subsidies produced some 40 percent of domestic primary copper, some 65 percent of our zinc, and from 60 percent to 95 percent of our lead. The record below is from the Bureau of Mines (with a minor correction to eliminate mandans spent on Tri-State tailings, on an assumed basis of 65 tons per man-day, and elimination of the tonnages of Tri-State tailings):

From this record I have calculated tons of ore per man-day as follows:

That is, during this period efficiency of operations increased in copper mines by 36 percent, lead-zinc mines by 28 percent.

Further, published data shows that during this period tons per man-day at the southeast Missouri lead mines declined by one-third. Since these mines contribute about a quarter of all lead-zinc ore tonnage, other lead-zinc mines in the country must have increased their efficiency much more than is indicated by the figures above.

Increased exploration

Exploration for new ore deposits is a necessary activity. It is not, however, the type of exploration which sustains the industry. The great source of new ore is exploration in and around areas being mined. By their very nature, marginal producers tend to be most active in this work. The need for more and better ore reserves drives them to it. The great deterrent to such work is apprehension at the prospect of falling prices. The marginal miner must conserve his cash if he is to survive the next depression.

Aside from the direct grants for exploration proposed by this bill, its major effect will be the provision of confidence for high-cost producers that their market is to be stabilized and they may expend their resources in the search for new ore.

Weakening of price pressure

During the past year we have seen examples of the classical rule that in a seller's market prices are determined by the costs of marginal production. Copper and zinc price increases during 1948 were made