Mr. ENGLE. Neither of these bills have provision for building smelt

ers.

Mr. D'EWART. In other words, the smelters are outside of the subject of this legislation?

Mr. ENGLE. That is correct, but it is assumed that if the Government gets enough of this material it will deal with the big smelters or it will have smelting done in some way.

Mr. D'EWART. This legislation does not provide that?

Mr. ENGLE. That is correct.

Mr. D'EWART. My next question was with regard to how the bill firms the market for the ultimate consumer.

Mr. ENGLE. I might add this additional statement that Public Law 520, the stock-piling law, contains a provision which authorizes the Munitions Board to go into the field of conversion, if it wants to, through the RFC.

Mr. D'EWART. That is correct.

Mr. ENGLE. With reference to firming the consumer market, the stability which we are talking about will be secured through a definite purchase program by the Federal Government on a long-term basis. As I said previously, there are two approaches to that. One is the manner proposed in this legislation which in effect, with some refinements, continues the premium-price program under which any operator who qualifies from the standpoint of meeting the specifications for any product which is listed by the Munitions Board as critical and strategic will be entitled to a premium payment up to a certain level, but not beyond it.

In the instance of the bill which I have introduced, it would be the maximum premium price paid under the premium price plan plus or minus the percentage differential in the Bureau of Labor Statistics wholesale price index for all commodities, 1926 equals 100.

Any arbitrary amount could be established, say 25 percent above the market price. In fact that has been suggested by some because that is the "Buy American" clause differential, but the stability accrues from the fact that a long-range Government program providing an assured market for mine production enables operators and prospectors to know that they will be able to obtain a definite relative price for the ores they mine. Does that answer your question?

Mr. D'EWART. The assured market is in the Munitions Board, then?

Mr. ENGLE. That is correct.

Mr. D'EWART. And only as the market assured by the purchaser of the Munitions Board-it is not assured directly in this act. This act, as I understand it, is a premium payment to those operators that are not able to operate otherwise.

Mr. ENGLE. That is correct, except that the Munitions Board accepts the material, sets the specification and designates those materials which will be on the critical list. In fact, it has already done it.

Mr. D'EWART. But they do not fix the price at which that will be purchased. They do fix an incentive price above the open market. Is that right?

Mr. ENGLE. That is correct, within certain limits. There is a significant distinction with reference to that between the bills which we have in mind and the one, for instance, which is proposed by the administration and which was introduced by Mr. Spence previously

rich deposit. I am talking about the Hercules mine in Burke Canyon in the State of Idaho. It was a bonanza. The smelting company simply notified the owners they did not want it, not to ship it, and presumably they proposed to take over the mines. This ore of the mines was so rich that they could ship it in the crude form to Swansee, England, and to Belgium crude and get money to put in a mill and equip the property, which they did and opened one of the biggest bonanzas in the State of Idaho which produced $88,000,000 and paid $18,000,000 in dividends and built the beautiful skyscrapers you find in Spokane. They had an engineer, who put in a beautiful charity settlement and this mine made millionaires of the eight men who owned the mine. Had the smelter company had its way those men would still be playing around in the mud of the milk yard and running the locomotive. That was a little instance in Idaho history that I would like to have in the record.

Mr. ENGLE. Thank you very much, Mr. White. Are there any further questions by the committee?

Mr. MARSHALL. I would like to make one observation, Mr. Chairman.

Mr. ENGLE. Mr. Marshall.

Mr. MARSHALL. In listening to the testimony this morning it appears to me that if this lead industry is the monpoly that it appears to be, anything we do along the line of incentive payments is pouring the taxpayers' money down the rat hole because it would seem to me that these various companies might very well just simply sit back here and play us for whatever they pleased under the basis of the way it is set up. That is merely an observation I wanted to make in passing.

Mr. ENGLE. Mr. Marshall, the shoe is on the other foot. The lead industry opposes this legislation.

Mr. WHITE. Mr. Chairman, I would like to ask one question about the supply. It is a matter of fact that lead is in critical supply, is it not?

Mr. ZIEGFELD. At the present time it is in pretty good supply, sir. It was in critical supply up until about 6 weeks or 2 months ago.

Mr. WHITE. Lead is one of the most vital needs of industry in transportation. There is not an undersea boat that is navigated that does not have to depend on lead batteries and lead barrels. There is not an airplane that flies in the sky that does not have to depend on lead batteries. There is not an automobile on these roads or a truck or a bus that does not have to depend on lead batteries and lead bearings. It was told to us back in the days of the "tin Lizzie" that every Ford contained 60 pounds of lead in batteries and bearings. Is that somewhere near a correct statement?

Mr. ZIEGFELD. There would be around 20 pounds in the battery at any rate.

Mr. WHITE. So lead is critical. As a matter of fact, the bulk of the lead produced in the world is produced in the Western Hemisphere, is it not.

Mr. ZIEGFELD. Yes, sir.

Mr. WHITE. And the copper and metals of that kind are very largely produced in the east, Africa and places of that sort.

Mr. ZIEGFELD. Yes, sir.

Mr. WHITE. If we do not develop lead in the Western Hemisphere, particularly in the United States, we are liable to run into a very serious and critical situation. Is that not a fact?

Mr. ZIEGFELD. Yes, sir.

Mr. ENGLE. Thank you very much. Thank you for coming before the committee.

Mr. ZIEGFELD. Thank you for the opportunity, Mr. Engle.

Mr. ENGLE. The next witness will be Mr. Allen Hearst, secretary of the Northern Mining Association.

Mr. Hearst, will you state your full name and the capacity in which you appear and the people whom you represent?

STATEMENT OF ALLEN HEARST, SECRETARY, NORTHERN

MINING ASSOCIATION

Mr. HEARST. My name is Allen L. Hearst. I am secretary of the Northern Mining Association, and in general policy represent that group. That group covers the northern part of the United States, including the tale mines of northern New York, the copper mines and talc mines and the granite quarries of New Hampshire and Vermont and mines in Maine and in Connecticut.

I also am president of the Connecticut Mining & Mill Co. which is operating or attempting to bring into production a small copper property located at Bristol, Conn.

Basically the association endorses in principle the use of incentive payments to bring critical and strategic minerals into the stock pile. We also recognize the fact that the mere waving of a wand of dollars does not automatically bring either metals or minerals into the stock pile. It requires development and exploration.

The New England area has been bypassed for some years as a producer of minerals and metals and our exploration problems up there are considerable. We have, among the deposits in New England, that could probably-or petrhaps I should say possibly become of economic importance, manganese deposits, copper deposits, lead deposits, and zinc deposits. The Northern Mining Association feels that in principle the outline of the amendments of the bill 976 would help many of the smaller operators to explore their properties with subsequent production that would be of value in the stock-pile program. I believe that is the basis of our feeling, Congressman Engle, on that. I am open for questions on it.

Mr. ENGLE. May we then conclude you are in support of this legislation?

Mr. HEARST. Yes.

Mr. ENGLE. Are there any questions by the committee?

Mr. Murdock?

Mr. MURDOCK. I believe not, Mr. Chairman.

Mr. ENGLE. Mr. Lemke?

Mr. LEMKE. May I suggest, have you read the bill I have introduced, H. R. 2031, in connection with the Engle bill?

Mr. HEARST. I have personally read that, Mr. Lemke. We did not get copies of that bill quite soon enough to circularize our association.

referred to. It has no limit at all. You can go sky high, and do anything with the materials you want after you get them.

If there are no further questions

Mr. MARSHALL. I have one question.

Mr. ENGLE. Mr. Marshall.

Mr. MARSHALL. What interest rate is paid on risk capital?

Mr. HEARST. My answer to that is that risk capital tries to get the best interest rate it can, probably at somewhere around 40 percent. Mr. ENGLE. How much?

Mr. HEARST. Forty percent.

Mr. WHITE. May I ask you a question?

Mr. ENGLE. Mr. White.

Mr. WHITE. As a matter of fact, you are speaking of risk capital. Does the investor not buy stock in the mines with the expectation that it will be highly profitable?

Mr. HEARST. Risk capital invests in mining properties quite often on the availability of stock at a low figure during development work, and hopes to realize their margin of profit from the sale of that stock after an assured ore body has been proved.

Mr. WHITE. There is no definite return there?

Mr. HEARST. There is no definite return indicated. When I used the rate 40 percent they usually want 5 to 1 over what they could get under normal investments. Normal investments pay from 4 to 8 percent.

Mr. WHITE. As a general proposition risk capital prefers what they call penny stocks to these high prices, is that right?

Mr. HEARST. I am not a market operator, Mr. White.

Mr. WHITE. If you wanted to promote a mine you would find if you had a hundred dollars worth of stock you would not find any dangers of risk capital but if you had 5 percent, any value would increase their investment. Therefor, there is a general feeling among the investors of risk capital they want small denominations of stock with small capital, what they call penny stock, so that if there is any increase they will realize a big increase on the investment. Is that not a general action in mining?

Mr. HEARST. That seems to be, particularly on the Spokane and Salt Lake exchanges. You have many exchanges there that use the penny stocks. I am not a market operator so I cannot answer those questions.

Mr. MARSHALL. Is that acceptable credit to small mine operators? Mr. HEARST. No. Basically a small mine operator, the man that needs from 20 to 50 thousand dollars for a development program, is going to find himself very much behind the eight ball if he attempts to finance through the formation of a corporation and the subpayal of stock. First of all, the SEC frowns very heavily on promotional activity in regard to the development of mining of prospects. The first development work that must be done is based upon geologic knowledge, plus hope, and those two have produced our biggest mines in the United States today. There are examples where the stubbornness of individuals to bring a mine to produce has resulted in some of our largest producers.

On the other hand, we can go back to the Bunker Hill mine, which I am sure Mr. White is familiar with, and can recall despite ore bodies and smelter difficulties they had a tremendous struggle in the early

days. Mr. Gardiner, who was one of the original promoters, had terrific difficulties at Bunker Hill and Sullivan, raising enough money to even build the mills.

Mr. MARSHALL. Do you have any solution from the small mine operators' standpoint as to what might be provided for more suitable credit?

Mr. HEARST. It is my personal feeling that if the Government can supply a stabilized price on the various metals and supply some of the original high-risk capital in limited amounts for exploratory work, that your small mine operator can still retain part of his shirt in the further financing of his mine.

Mr. ENGLE. That is precisely what this bill seeks to do.

Mr. HEARST. It was my interpretation of the bill, yes.

Mr. WHITE. Is it a correct statement to say that in the development of any ordinary mine taken from the grass roots that an outlay of $200,000 would be necessary to put it into production?

Mr. HEARST. That, in most cases, would be a minimum figure in my opinion.

Mr. ENGLE. If there are no further questions, thank you very much for your statement before the committee.

The committee will be adjourned until 2 o'clock this afternoon at which time we will proceed and endeavor to hear the out-of-town witnesses.

(Whereupon, at 12: 15 p. m., the committee was adjourned, to reconvene at 2 p. m., the same day.)

AFTERNOON SESSION

Mr. ENGLE. The committee will be in order.

The first witness will be Mr. Albert E. Petermann, president of the Hecla Consolidated Copper Co. Please come forward.

Please state your full name, Mr. Petermann, the capacity in which you appear, and whom you represent.

STATEMENT OF ALBERT E. PETERMANN, VICE PRESIDENT, CALUMET & HECLA CONSOLIDATED COPPER CO.

Mr. PETERMANN. My name is Albert E. Petermann. I am a vice president at Calumet & Hecla Consolidated Copper Co., and represent it at this hearing. My views are those of my own company and do not necessarily coincide with those of any other member of the industry.

My company and its predecessors has been mining copper in Michigan since 1865. We have been through many situations in the copper business. High prices, low prices, insatiable demand, extreme overproduction; none of these are new to us.

Our attitude toward Government assistance to nonferrous mining is simply this: If national security requires that the Government assist mining in order to procure greater production, we are for it. If national security does not require additional production, we have no more right to a subsidy than a manufacturer of lawn mowers.

Whether the present domestic production of nonferrous metals is adequate for national security must be decided by Congress. This question must be decided in the light of the international situation

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