Agendum 383A 10 June 1940

IRON ORE INVESTIGATIONS

On 30th April, 1940, I brought under the notice of the Prime
Minister [1] the position in regard to the investigation of the
iron ore resources of Australia. Copy of my letter to the Prime
Minister and of the accompanying report by the Commonwealth
Geological Adviser [2] are attached.

2. The Prime Minister replied on 3rd May, 1940, in the following
terms:-

'With reference to your letter of the 30th April, in connection
with the iron ore deposits of Australia, I have asked the
Ministers for Trade and Customs, Supply and Development, and
External Affairs, and the Treasurer to carefully consider the
various phases of the matter from their departmental points of
view and to confer with you subsequently in the preparation of a
recommendation to Cabinet.

The Ministers have been requested to treat the matter as one of
urgency.' [3]

3. The Commonwealth Geological Adviser reports that investigations
have revealed the following facts:-

(1) Numerous small, scattered sources of supply are too isolated
to be capable of meeting the necessary overhead expenses for their
economic development and exploitation.

(2) Large deposits far inland and far removed from suitable fuel
supplies cannot be worked economically for many years to come;

since the railway freight involved would make the ore
prohibitively costly when delivered at the blast furnace; or,
alternatively, would cause too much loss to the railways if
carried at unremunerative freight rates.

(3) Many reputedly large and rich deposits nearer the coast
proved, on close examination, to be of negligible size and
importance. (Specifically, this statement applies, in addition to
others, to supposed major deposits in Tasmania and New South
Wales, to others on the shores of Spencer's Gulf in South
Australia, and to deposits in Cape York Peninsula, Queensland.)
(4) Two groups of deposits, only, possess all the requisites of
size, quality and economic accessibility to render them capable of
profitable exploitation on a large scale under existing or
predictable conditions in Australia. These are-
(a) the Iron Knob group of deposits in South Australia;

(b) the Yampi Sound group of deposits in Western Australia.

4. The Commonwealth Geological Adviser states that the maximum
amount of ore available at these two deposits under the most
optimistic estimates possible is:-

Iron Knob group 200 million tons
Yampi Sound group 150 million tons
Total 350 million tons.

5. If, however, more conservative estimates of economically
available ore are accepted the quantities would be:-

Iron Knob group 150 million tons
Yampi Sound group 50 million tons
Total 200 million tons.

6. The consumption last year in Australia was 2 1/4 million tons.

The Commonwealth Geological Adviser, however, states that with the
completion of a new blast furnace at Whyalla, South Australia, the
3 million ton mark will be passed very shortly. The major
engineering commitments of the immediate future (bridges, battle-
ship dock, etcetera) and the development of great industries such
as aeroplane building, motor car construction, armaments,
etcetera, indicate that a demand of at least 5 million tons of
iron ore a year must be reached almost immediately. In view of the
peculiar natural advantages enjoyed by Australia in the Pacific
region, it is highly probable that the demand will exceed 10
million tons a year within a decade.

7. It can be expected, therefore, that at the outside the
economically exploitable iron ore deposits will not last for more
than 70 years.

8. A decision as to the necessity for the retention of the embargo
is urgently awaited for the following reasons:-

(1) The operating Company at Yampi Sound, the Yampi Sound Mining
Company, is carrying on at Koolan Island at the expense of the
Commonwealth, which is approximately 3,000 a month.

(2) The testing operations for which an arrangement was entered
into between the Commonwealth and the State Mines Department,
providing for the engagement of the Company, have now been
completed.

(3) Under the arrangement, the Yampi Sound Mining Company is
entitled to two weeks' notice of the termination of the
engagement. Pending a decision by the Government, it will not be
desirable to give notice.

(4) Cessation of operations at Yampi Sound will throw out of
employment some 50 workmen and possibly office staff of the
Company in Perth. Until a decision has been reached by the
Government, the Company is uncertain as to whether its
organisation should be disbanded or not.

(5) On behalf of Japanese interests who, it is stated, have
invested a sum of the order of 300,000 in the undertaking, the
Japanese Government is pressing strongly for a decision (see
attached copy of a letter dated 5th June, 1940, from the Consul-
General for Japan). [4]

9. As stated in my letter of 30th April to the Prime Minister, the
question relating to the embargo is one which involves
considerations which do not really come within the province of my
Department, the function of which is primarily to carry out
through the Commonwealth Geological Adviser the survey of the iron
ore resources of Australia. My Department, however, is vitally
concerned with the arrangement entered into with the Yampi Sound
Mining Company which, in turn, is involved in the situation with
Japan.

10. I, therefore, submit for Cabinet's consideration the question
as to whether the embargo on the exportation of iron ore is to be
continued. In view of the advice tendered by the Commonwealth
Geological Adviser I am strongly of the opinion that the retention
of the embargo is essential in the future economic interests of
Australia. [5]

H. S. FOLL