Profit-Makers On New

Guinea Goldfields

A Newspaper Argument, and Some Comparisons

was an interesting exchange of views about New Guinea taxation, in the Brisbane Courier-Mail, in December.

The opinion that in the interests of investors there should be a reduction in the duty on mining machinery, tractors and road plant, without which gold can not be produced, and that the duty on aeroplane engines and parts and petrol for aviation purposes should be abolished, was expressed by Mr. W. A. Freeman, who is the chairman of directors of Placer Development, Ltd., and Bulolo Gold Dredging, Ltd.

The tariff averaged 10 per cent., said Mr. Freeman, and during last year the finances of the Administration showed a surplus, which was solely due to the existence of the goldfields of the Morobe district. While the present royalty on gold produced appeared to be a very fair % taxation, it was necessary that the cost of operation and transport_ should be re duced. The four dredges now operating at Bulolo and Bulwa had to date produced 520,0000 z. of bullion, worth more than £3,000,000 in Australian currency. The life of the property had been much in creased by the development of deep dredging grounds, and there were large areas still to be tested. Two new dredges were about to be constructed, one to dig to 80 feet below water level, with a 40 feet bank, and the other 115 feet below water level with a 50ft. bank. It had been found practicable to design these dredges so that they could be transported by aeroplane. The company had exercised certain options on the Bulolo River in the Wau district, and plans were in hand for dredging those areas.

This brought a retort, that “taxation in the Mandated Territory is anything but fair,” from Mr. J. P. Blaikie Webster, chairman of New Guinea Goldfields Ltd., who had just arrived in Queensland from New Guinea.

Mr. Blaikie Webster said that, origin ally, a royalty of 2 per cent, on gold produced was imposed with a view to building a road from Salamaua to the goldfield, but no road had been built; subsequently, this rate of royalty was in creased to 5 per cent. Such a rate might be a fair one when applied to alluvial gold, but was extremely unfair when applied to gold produced from veins and ore deposits, for, as any experienced engineer knew, the cost of treatment of alluvials was not comparable with the

heavy expenditure necessary for under ground mining and development, ore ex traction, hoisting, crushing, milling, &c.

On his (Mr. Webster’s) recent visit he examined a project for the treatment of a large low-grade deposit of ore which, in most other parts of the world, would have held merit but which, under the 5 per cent, royalty unfairly levied in the Mandated Territory, would have meant payment to the Administration of something like 50 per cent, of the profits. This unfair royalty did more than anything else to prevent development and exploitation of the veins and ore deposits of the Man dated Territory. The suggestion that aeroplane engines, &c., should be relieved from the import duty payable on mining machinery was even more unfair, unless it was proposed to replace it by the commonsense expedient of a tax on profits of all undertakings.

In the adjoining Territory of Papua, which had a long and successful record of native administration, such punitive taxation as was imposed on gold mining in the Mandated Territory was unknown, and although, in area, Papua and the Mandated Territory were much the same size, the total cost of administration in Papua was about one-third of that of the Mandated Territory. If enquiry was to be made it should be commenced from that aspect.

Editorial Note

There are two main groups of mining enterprises on the New Guinea goldfield —namely, the Bulolo group, which is operating dredges and making very large profits; and the N.G.G. group (New Guinea Goldfields Ltd.) which is operating various methods of recovering gold (sluicing, gold ridges mill, deep mining at Edie Creek), and which is making small profits.

In the beginning, the Morobe field was wide open to all comers and all enter prises. The Bulolo people selected their country and made their plans for operat ing and for transport, and then went ahead like a machine. They adhered to their programme and their timetable and, in reaching large and profitable produc tion according to plan, they established the New Guinea gold industry and per formed a national service.

The N.G.G. group, on the other hand, seemed to have no clear-cut plan, and, although they had the same opportunity as Bulolo, they wasted years in “messing about.” Their company formation methods were spectacular. They obtained rights over large areas by issuing scrip lavishly, until they held most of the country at the Wau-Edie Creek end of the’ goldfield, with an issued capital of nearly £4,500,000. The original rich Edie Creek leases on the Royal-Glasson group became Edie Creek Pty. Ltd.; this later was acquired by Ellyu Ltd.; and about 1929 Ellyu and

various other concerns were absorbed by N.G.G. Ltd., which was formed under the aegis of the Mining Trust —a multi millionaire concern, interested in Mount Isa (Queensland) and other minefields.

There was much speculation in N.G.G. and associated shares, and various worthy gentlemen no doubt benefited correspond ingly from these successive mergers and absorptions; but the facts remain that N.G.G., despite the magnitude of their plans, operations and capitalisation, have not produced anything like the profits anticipated, and their methods and policy have been under an increasing volume of criticism by practical men. By 1933, it was evident that the company would have to confess to over-optimism and bad planning, by writing down its capital; and. in 1935, the capital duly was written down by 75 per cent.

Since then, scrip-holders have been watching N.G.G. operations hopefully, but there has been nothing there to cause a stir. There has been more exploratory deep mining at Edie Creek, crushing and cyanide operations at Golden Ridges, and alluvial activities, partly on a tributing basis, along Koranga Creek and there abouts. But there is nothing, anywhere, to suggest that ordinary shareholders can count on more than 10 to 15 per cent, per annum on the written down value of their shares.

That is not a creditable record: and it has to be set against the outccy of Mr.

Blaikie Webster on the subject of New Guinea taxation. When it wrote down its capital in March, 1935, N.G.G. itself con fessed that it had miscalculated (or muddled, or been unfortunate—the term is not material to the argument) to the extent of some £3,000,000. In view of that, Mr. Blaikie Webster scarcely is competent to say that the inability of his company to show substantial profits is due to the 5 per cent, gold royalty, or the

high cost of administration in New Guinea as compared with Papua, or transport charges. History is against him.

The Bulolo group, which has made a success of things, and established a rich gold industry in New Guinea, apparently is satisfied with the gold royalty system, but suggests reductions in the import duties on necessary equipment. The N.G.G. group, which has been “a pain in the neck” to most people concerned, and more especially to its own shareholders, demands the abolition of the gold royalty system, and other changes which, in cidentally, would penalise the Bulolo companies.

Which group of interests is more de serving of the ear of the New Guinea administration ?