114 Mr F. G. Shedden, Secretary of Department of Defence, to Lt Col W. R. Hodgson, Secretary of Department of External Affairs
YAMPI SOUND-DEVELOPMENT OF IRON ORE DEPOSITS BY JAPANESE
With reference to your memorandum of 24th November 1937  on the
above subject, I desire to inform you that the matter has been
considered by the Defence Committee and the following observations
by the Committee are submitted.
'1. The matter was considered by the Defence Committee in 1934 and
again in 1935. The proposals then in view were as follows:-
(a) The formation of an Australian Company registered under
Western Australian law and financed by Japanese interests to work
the iron ore leases at Yampi and to deposit the ore in ships for
export to Japan.
(b) The Australian Company to be wholly Australian controlled.
(c) Only Australian labour to be employed in Australia.
2. The Committee decided then that there was no objection to the
proposal from the defence point of view, but, on the contrary, it
would be advantageous in developing a further source of supply of
iron ore in Australia.
3. The memorandum from the Department of Commerce now submitted
disclosed the existence of an agreement between Japan Mining
Company and the lessees (Brasserts) which involved a radical
departure from the conditions for the development of the iron ore
deposits at Yampi Sound as originally contemplated. The Defence
Committee decided to submit the following observations from the
defence and national aspects-
4. The Committee adhered to its previous decision that from a
strategic point of view the harbour at Yampi Sound would not be
likely to create any danger as a potential Naval base.
5. The Committee, however, was of opinion that the development of
this area under the conditions set forth in the agreement between
Japan Mining Company and Brasserts quoted in paragraph 6(d) of the
memorandum from the Department of Commerce, would be an aid to the
influx of Japanese into North Australian waters, thereby
increasing the possibility of undesirable incidents and
constituting a potential threat to Australia.
6. They observed that the number of Japanese at present engaged in
the pearling industry had paved the way for Japanese penetration
in North Australian waters. These operations are carried on
outside territorial limits and therefore beyond Commonwealth
control, whereas the development at Yampi Sound under the
conditions of the agreement, if it involved the legal right of
entry into Australia and residence therein, would carry this
penetration to a further stage. In this connection, the Committee
noted that the provision of the agreement quoted in paragraph 6(b)
of the memorandum from the Department of Commerce was at variance
with the conditions of the lease entered into between Brasserts
and the Western Australian Government. The latter provides for
cancellation of the lease in the event of the employment of
Asiatics, whereas under the agreement, Brasserts are expected to
secure the right of domicile for Japanese engineers and
7. The resources of iron ore in Australia appear at present to be
an unknown quantity , but the Committee understands that the
supply is by no means inexhaustible, consequently, it is of
opinion that the proposal to allow the Japanese to have complete
control of the output at Koolan Island for 50 years (paragraph
6(d) of the memorandum) , is a very dangerous one.
8. For the reasons stated above, the Defence Committee considered
that there were Strong objections to the development of the iron
ore deposits at Yampi Sound under the conditions set forth in the
agreement between Brasserts and the Japan Mining Company, but they
adhered to the view previously expressed that there is no
objection from the defence point of view to its development on the
basis of the proposals quoted in paragraph 1 above.'
F. G. SHEDDEN
[AA : A981, AUSTRALIA 90B, i]