With further reference to your letter of 11th April, 1938 [2], and
to previous correspondence on the subject of iron ore, I have the
honour to inform you that this matter has now received the fullest
and most sympathetic consideration of the Government. The closest
attention was given to the particular points raised in your letter
of 5th April [3] and in that now under reply.

The best expert advice available has been obtained, and in the
light of this advice the Government is satisfied that the
accessible iron ore deposits of Australia which are capable of
economical development are so limited as to compel their
conservation for Australian industrial requirements. You will
recall that I gave expression to our concern in this regard in my
letter to you of 29th March. [4]

Copy of a report by the Commonwealth Geological Adviser on the
subject of iron ore is attached. [5]

Careful consideration has been given to the proposal that licences
should be granted to export limited quantities of iron ore, but
the Commonwealth Government has come to the conclusion that such
action would be inconsistent with the necessity to conserve
Australia's limited iron ore resources.

For these reasons I am very reluctantly obliged to inform you that
it is intended completely to prohibit the export of iron ore from
Australia, and a proclamation to this effect will be issued to
take effect as from 1st July, 1938.

During the early stages of Messrs Brasserts' activities at Koolan
Island no doubt existed as to the adequacy of our iron ore
resources, and, in consequence, the Government made no demur to
the proposed enterprise. It has been only as a result of
investigations which have recently taken place, and which I may
say were initiated owing to apprehension expressed by experts,
that the necessity for our intended action has become apparent.

I note from your letter of 5th April, that expenditure and
commitments in connection with Koolan Island are already
substantial. The Government will be prepared to consider the
provision of a reasonable sum to meet equitable claims for
reimbursement of any expenditure which has up to this date
actually taken place in connection with development operations of
the Yampi leases.

We sincerely trust that your Government will appreciate that the
Commonwealth Government is acting only with the gravest sense of
responsibility and will accept the assurance that it regrets
exceedingly that the decision may affect important Japanese
interests. We hope, however, that the action which our duty
compels us to take will not impair the cordial and friendly
relations which have so long and so happily existed between our
respective countries.

J. A. LYONS