230 Commonwealth Government to Lord Cranborne, U.K. Secretary of State for Dominion Affairs
Cablegram 653 18 December 1940,
Your telegram 487  conveying message for Sautot  from de Gaulle , regarding nickel. We do not quite appreciate your concern in desiring to prohibit entirely to Japan this ore.
Ballard  has been in Australia for three weeks conferring with Interdepartmental Committee on various aspects New Caledonian economy and general report will be telegraphed to you shortly. In meantime following is summary of nickel position:
Commonwealth Government has agreed to take 6,600 tons nickel matte from Le Nickel for period of one year. This is output of two furnaces. Whole economy of colony is dependent on satisfactory solution of nickel problem. In order to absorb production of independent small miners Le Nickel must use a third furnace, and it will therefore become necessary to ensure market for output of this furnace which would amount to 3,360 tons nickel matte per annum. Use of third furnace is in turn dependent on satisfactory shipping arrangement for additional coal and coke necessary which are causing difficulty at present. Rapadzi, local manager of Le Nickel, is arriving Australia 23rd December for discussions.
In meantime, we are negotiating with Inco for sale of as much nickel matte as possible. Present indications are that we may have difficulty in disposing of output of more than two furnaces to Inco. If third furnace cannot be operated then either independent mines must cease production or the ore must be disposed of From our point of view we have no need for it. It contains only 4 per cent. nickel and in view of difficulties mentioned above as well as the fact that the Japanese take this ore in their own vessels, our opinion is that export of this ore to Japan within recent export limits should not be prevented as it cannot be economic proposition for Japanese and in any event to prohibit export might create an exceedingly grave position with Japan for Sautot. In short, export of this low grade ore will not materially assist Japanese, will do us no harm, will make Sautot's difficult task much easier, and will provide answer to any suggestion that we are ousting Japanese entirely.
In this connection question has already been asked us by Japanese Consul-General  if Australia has requested Sautot to prevent the supply of raw materials from New Caledonia going to Japan.