Your telegram 487 [1] conveying message for Sautot [2] from de
Gaulle [3], regarding nickel. We do not quite appreciate your
concern in desiring to prohibit entirely to Japan this ore.

Ballard [4] 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 [5] if Australia has requested Sautot to prevent
the supply of raw materials from New Caledonia going to Japan. [6]