[On 22 February 1940 Strahan forwarded to Hodgson papers indicating that two Japanese planned to involve themselves in silver lead mining in Western Australia (see file AA: A981, Australia 90B, ii). He said he had asked the Department of the Interior whether Commonwealth action was contemplated and whether the Government of Western Australia should be asked to act, and invited Hodgson's comments.]
SILVER LEAD DEPOSITS IN WESTERN AUSTRALIA-JAPANESE ACTIVITIES
With reference to your memorandum of 22nd February, 1940, on the above mentioned subject, I desire to inform you, in view of high national considerations which may be involved, that I consulted the Minister for External Affairs  on the question before submitting the undermentioned views.
It is agreed that the Premier of Western Australia  should receive copies of the correspondence, but it is a matter for consideration as to whether at this early stage any firm views of the Commonwealth Government should also be communicated to him, in anticipation of the formation of a company to work the leases in question. Obviously the principle involved is whether Japanese economic penetration by means of employment of Japanese capital and nationals in the exploitation of Australian resources is to be discouraged or not.
In the case of Yampi Sound iron ore deposits, the Commonwealth Government took its stand on the probable early depletion of known iron ore deposits in Australia, and by a prohibition of exports of this commodity prevented the further development of this particular enterprise.
Silver lead ore would appear to fall into a different category.
The refined metals from this ore constitute one of Australia's principal exports, and to the best of my belief, no question has arisen as to the possible depletion of deposits. Therefore, the Commonwealth Government cannot reasonably, as in the case of Yampi Sound, subsequently intervene and prohibit the export of this commodity. The power of prohibition of export would appear to be the only one available to the Commonwealth Government, vis-a-vis the States, in relation to mining leases and activities.
Thus we are brought back to the general principle of Japanese penetration which was avoided in the case of Yampi. If it is felt that it should be discouraged, then it seems advisable to inform the Premier of Western Australia of the views of the Commonwealth Government, and leave it to the West Australian Government, assuming it is in accord, to take such steps under the Mining Laws as will prevent the establishment of any company subsidised or mainly capitalised by Japanese interests.
I suggest that the attention of the Prime Minister  be drawn to this case, for an indication of his views. hi this respect I have in mind also the avoidance of the difficulties which arose, and still confront the Commonwealth Government in regard to compensation claims, over the Yampi Sound leases. 
[W. R. HODGSON]