I have the honour to invite your reference to previous correspondence regarding Portuguese Timor in general and the mining concession held there by Mr A. J. Staughton  in particular.
2. From information furnished to me by the Australian Trade Commissioner at Batavia some three or four months ago, based on your letter to him of April 12th, 1937 , it appeared that 'the (Portuguese) Minister of the Colonies  had stated that the Staughton concession was not in danger, but that he desired that it should be utilised . . .'.
3. From the latest information I have received from His Majesty's Ambassador at Lisbon , it transpires that the Portuguese Government's attitude has been: that no transfer of Mr Staughton's concession was recognised as valid, but that they were (i.e. when the matter was discussed) ready to reverse the decision to revoke the concession, if Mr Staughton appealed against that decision and intended to spend money on development.
4. In the circumstances there would appear to be some risk, if only the information referred to in paragraph 2 above had been available, that Mr Staughton may not have taken the action necessary to obtain reversal of a decision to revoke his concession.
5. I have lately mentioned the subject of this concession to the new Governor of Portuguese Timor (Major Neves da Fontoura) who passed through Batavia a few days ago. I was glad to find that he is quite sympathetically disposed to the concession remaining in Mr Staughton's hands, though he indicated that it was certainly expected of Mr Staughton that steps would be taken to develop it.
6. The latest information I have received from Portuguese Timor (a confidential report from a Mr J. K. Stephenson)  conflicts somewhat with this official attitude, although, read between the lines, it seems to furnish some explanation of this inconsistency.
Mr Stephenson states that Mr Staughton asks an 'assurance from the Portuguese authorities that he may develop his concessions without let or hindrance, and that subject to performance his titles are honoured and valid, and not subject to outrageous transfer as in the past; and that his employees and servants may at all times proceed on their lawful occasions peaceably and not detained (sic) as was Mr Bryant, or keys and possession of assets demanded without due process of law as in my own case'. This assurance, he says, has been refused. Later in his letter Mr Stephenson suggests that if a 'climb-down by the Portuguese authorities' can be obviated and a specific assurance obtained from them, he is sure Mr Staughton will remit the necessary money, send a drilling staff, and start work. Mr Stephenson suggests that the question of 'saving face' may be an important factor, and that Mr Staughton's representatives and friends do not appreciate the importance of this point, and have shown much lack of tact in 'waving the big stick, which will never get them anywhere'.
7. A high-handed or truculent attitude may well have been a contributory cause of much of the trouble that has occurred in the past, and the time seems to have arrived when a change of attitude may obtain much better results.
8. As a first step I would suggest that Mr Staughton, or his fully accredited representative, should seek an early interview with the new Governor, and put his case before him in as friendly a spirit as possible, being careful to avoid any semblance of high- handedness or hectoring. It may also contribute to smooth working in the future if he will avoid all unnecessary recriminations against Portuguese officials as far as possible. I feel sure that he will meet with a friendly reception, and that Major da Fontoura will not want difficulties put in Mr Staughton's way as long as his representatives try to maintain friendly relations with, and show due consideration to, the Portuguese officials with whom they have to deal.
9. I hope that it may be possible to convince Mr Staughton both of the importance of a tactful attitude towards the Portuguese authorities, and of the need of demonstrating his readiness to develop his concession.
10. I shall be very grateful if you will kindly cause enquiries to be made of Mr Staughton to ascertain the present position, and in particular to elicit (1) whether he duly appealed against the decision to revoke the concession; (2) whether that decision has been explicitly reversed; and (3) what action he is now taking to effect the development of his concession.
11. If I could be given this information at an early date, and if Mr Staughton is taking any early steps to open friendly discussion of the matter with the new Governor, I shall be happy, if desired, to write to Major da Fontoura personally as a sequel to the very friendly conversation I have myself had with him on this subject.