Governments

N.G.G. Ltd. Want Concessions From

Co.’s History Does Not Inspire Goodwill

report supplied to the newspapers of the sixth annual general meeting of New Guinea Goldfields Limited on February 28 gives no indication of the temper of the meeting. We do not know how the shareholders accepted the an nouncement that there would be no dividend, and the explanation of policy by the chairman, Mr. J. P. Blaikie Webster.

The following is a summary of the report of the chairman’s speech: During the year the output of fine gold amounted to 37,694 ozs., for a profit of £152,020, compared with the previous year’s output of 40,592 ozs., for a profit of £180,091. This reduced output was due to the anticipated lower grade of ore treated in the Golden Ridges mill.

The year was characterised by heavy capital expenditure, for into this period fell the com pletion of the power transmission line and the installation of transformers, etc., the erection of the tailings re-treatment plant at Golden Ridges, and the purchase of plant and machinery, and partial cost of erection of the new mill at Edie.

In consequence, capital expenditure amounted to £174,904, or about £23,000 more than profits.

All members of the Board were anxious that some dividend should be paid, but we had to face these facts, together with the knowledge of additional capital expenditure incurred after the close of the financial year in completing the Edie mill and the desirability that provision should be made for continuing the drilling and de velopment programme from which satisfactory results are being obtained. Under these cir cumstances the Board decided to conserve cash resources, which amounted to £llB,OOO at the end of the financial year, and to carry forward the credit balance on Profit and Loss Account now amounting to £211,293.

With the new mill now in operation, the Edie or Upper Area is now a completely equipped entity. We had anticipated that this mill would have been completed in August last, but not only was the construction work affected by exceptional rains, but delays were experienced in shipping and other transport, so that it was only last month that we were able to commence milling, treating low-grade ore in order to tune up the plant preparatory to normal operations. The mill con sists of rock breaker, 20 stamp battery, amalga mation plates and cyanide plant, and it is to the credit of our staff that from the commencement of the trial run everything worked smoothly and no difficulties arose.

In a new plant, the initial absorption of gold is considerable, and in view of this, and of the low grade of ore treated during the trial run, we regard as satisfactory the first clean-up on 14th February, which produced 3,710 ozs. of bullion containing 938 ozs. of fine gold. Latest reports indicate that the mill is running up to its de signed capacity of 100 tons daily; sand and slime residues are assaying about 0.4 dwts. gold per ton, which leads to the expectation of a satisfactorily high gold recovery.

The question of recovery of the silver contents of the ore is receiving constant attention. Even at to-day’s low price of silver, the developed ore reserves at Edie carry a gross silver value of more than £250,000. Recent tests have shown no metallurgical difficulties in obtaining a recovery of 95 per cent, of the silver, at a working cost of about 10/- per ton of ore, but costs of air trans port of re-agents makes this process impracticable.

A year ago the total developed and partly developed ore reserves at Edie amounted to 156,000 tons, averaging slightly more than j4oz. gold, en suring more than 4 years’ supply to the mill.

Since then two diamond drill holes have cut the Karuka vein at greater depth, the first one at 210 ft. from the surface, showing a width of 9ft. 7 inches of ore, assaying 5.2 dwts. gold and Sy 2 oz. silver, and the second at 310 ft. from the surface intersected 6ft. 5 inches of ore assaying 7.3 dwts. gold and By> ozs. silver. A third hole at greater depth was abandoned without cutting the vein; survey showed some deflection in this hole and it is possible that the vein may have steepened.

The results from the first two holes must be considered as satisfactory; and whilst it would be unsafe to calculate additional ore based on only two drill holes, yet the results hold promise that

the further drilling work now being undertaken may materially increase the ore reserves.

Diamond drilling from the No. 5 level of Edie lode No. 2 in order to locate the vein beyond the fault, was seriously delayed by transport diffi culties and the strike of European labour, and has only now been commenced.

Experience has shown that the cost of main taining underground workings is considerable, re timbering alone being a heavy item; and as the ore developed and ready for extraction will supply the Edie mill for several years, we have reduced underground development work to a minimum pending progress of diamond drilling, the results from which will enable us to prepare the most economical programme of future development.

A year ago it seemed probable that the supplies of ore to the Golden Ridges Mill would by this time be practically exhausted, but developments during the year have assured further supplies.

At the Upper Ridges, drilling disclosed an area of mineralisation, the extent of which is being determined. Simultaneously underground work is being carried out and to date the manager esti mates more than 20,000 tons of ore averaging 9 dwts. gold and 2 ozs. silver, with a much larger tonnage of low-grade ore. At a lower horizon, to the west of this area, ore was disclosed in cutting a path. An adit on this has now reached 155 ft., the average of the ore throughout being 8 dwts. gold and 8 ozs. silver over a width of 39 inches. The adit is being continued and a winze is being sunk, and if results are satis factory drilling will be undertaken.

At the Golden Ridges area, lying some 650 ft. directly below the Upper Ridges, the ore which could be won by open- cut methods has been ex hausted, but underground work from the shaft indicates more than 30,000 tons of ore, averaging 10 dwts. gold and 5 ozs. silver, practically the whole of which is developed and ready for ex traction. Diamond drilling is being undertaken and is indicating the possible existence of a deeper ore horizon.

Further study of the Golden Peaks area, lying below the Golden Ridges, suggests that this may be turned to account, if the royality on gold is removed in favour of a tax on profits and air transport costs are lowered.

Milling at Golden Ridges continued throughout the year and in April last the new tailings re treatment plant commenced operations and is working satisfactorily, both as to capacity and gold recovery. In addition to the tailings currently produced by the mill, we have a stock of 30,000 tons of old tailings, assaying Sdwts. gold and 3 ozs. silver, for treatment in this plant . . .

Our rich virgin alluvials are now approaching exhaustion, but we still have areas of lower grade river alluvials which can be profitably worked, and to which attention is now being paid.

We also commenced Keystone drilling on a selected alluvial area in the Wau flats, but the results showed this area to be unpayable. Drilling is now proceeding on our claims in the Koranga section; occasional high values have been met, but so far these are exceptional. The depth of the alluvial, 300 ft. and more, makes drilling slow and difficult. • . .

During the past year we experienced a series of strikes by European workers. These men were engaged under individual contracts at agreed rates of pay, and in many cases were earning more than £5O monthly, the company providing furnished quarters. These strikes led us to re view the employment of white labour on work performed elsewhere by natives and the result has been most satisfactory. Our mining operations over a period of years have had a marked edu cational effect on the natives, who exhibit a high degree of intelligence and in our experience are capable of being more extensively employed in all phases of mining and milling operations.

Restrictions on the use of natives in our mining operations are now being removed and we hope that if we are satisfied of their competency, our natives will be allowed, under adequate super vision, to carry out work which is permitted to natives in other mining fields.

No relief from taxation has yet been afforded us, but our representations made a year ago to the Administrator are now before the Minister, by whom I am assured they will receive consideration.

The matter now becomes more urgent in view of the recent official announcement indicating that the building by the Administration of the

road from the coast to the goldfield will be abandoned.

When our predecessors commenced work on our properties there was no royalty on gold or other taxation. Subsequently a royalty of 1 per cent, was imposed on the gold won with the object, we were informed, of building a road to the goldfield; by stages this royalty was increased to 5 per cent, and an import duty on machinery was imposed in addition to high lease rents. A survey of the road was put in hand and some other work undertaken, but evidently the scheme will now be abandoned. Meantime our contributions to the Administration have amounted to more than £160,000, compared with £336,000 distributed to shareholders as dividends. There may be justi fication to claim a return of those contributions; there is certainly justification for our request that we should now be relieved from this burden.

Gold mining in Australia is free from taxation and New Guinea, under the terms of the Man date, must be regarded as part of Australia. We do not seek, however, to avoid contribution to the revenue of the Mandated Territory, but we ask that this be borne equally from the profits of all industries there, affording all gold producers a necessary reduction. At the same time we ask that our overseas investors, who subscribed £1,000,000 for the development of our properties and who, in addition to sharing this burden of local taxation, have had to pay up to 25 per cent, in English income tax, may receive consideration and that our contributions towards the cost of administration should be by way of an inclusive profits or dividend tax, thus permitting our over seas shareholders to obtain in England, a measure of relief from dual taxation under the provisions of the Colonial Tax Relief Act.

A year ago I referred to certain negotiations then in progress for air transport at lower rates, and I am pleased to inform you that we have placed contracts for our air transport during the ensuing year at an average rate of a fraction over two pence per lb., or about £2O per ton over the distance of 33 miles from the coast. This represents a welcome reduction in our most important item of expense, which amounted last year to nearly £50,000. That these rates of air freight are remunerative is shown by the advent of other air services in the field, and our new contracts provide for the introduction of further heavy type aeroplanes to meet our transport re quirements.

Only by fostering free competition over a period of years have air rates been reduced to the present level, with benefit not only to us but to the whole goldfields community, and we have reason to believe that the introduction of modern high efficiency aeroplanes with low operating cost, of the special type largely used in other mining fields of the world, will further reduce rates.

My colleagues join me in thanking our General Manager, Mr. de Lautour, and his staff for their loyal and energetic services.

Mr. Blaikie Webster made four statements of public interest: (a) Ninety-five per cent, of the silver in certain ore bodies could be recovered, but the high cost of carrying by air the re-agents necessary for the process made this recovery impracticable. (b) The working of the ore of Golden Peaks, near Golden Ridg<es, might be profitable if the Administration aban doned its system of taxing the industry by imposing a royalty on gold, and placed a tax on profits instead; and also if air transport costs were lowered. (c) The Company had made urgent representations to the Cjtnmonwealth Government because it had been officially indicated that the Administration pro posed to abandon the plan of building a road from the coast to the goldfield. (d) It is demanded that the system of imposing a royalty on gold be aban doned and that a system of taxing profits be substituted.

It will be surprising if the Admini stration of New Guinea, or the Federal Government, give really serious con sideration to these representations. New Guinea Goldfields Limited, and the Min ing Trust (which controls N.G.G. Ltd.) have not been fortunate in securing the goodwill of governments. At this moment, Mr. Blaikie Webster, as the representative of the Mining Trust, appears to be en gaged in arguments with the Govern ments of Commonwealth, of Queensland,

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and of New Guinea. There is a feeling in certain governmental circles that Mr.

Blaikie Webster would like to be a dic tator and order governments about.

A Cabinet Minister, or Administrator, or public official may perhaps not con cern himself with the history of the Mining Trust; but he cannot ignore the fact that New Guinea Goldfields Limited, only a year ago, wrote off no less than £3,000,000 of its shareholders’ money which had been “lost” in New Guinea.

Mr. Blaikie Webster apparently wants to do to the governments what he and his directors did to N.G.G. Ltd. share holders —namely, hold them responsible for the operation of a policy which in volved the Company in colossal losses.

It is to be hoped that before the gov ernments give serious consideration to Mr. Blaikie Webster’s demands for re forms in New Guinea taxation and transport conditions, they will insist that Mr. Blaikie Webster disabuses their minds of the suspicion, strongly held in some quarters, that the directors of N.G.G. Ltd. are completely indifferent towards the interests of other important companies operating on the Morobe gold

field. If the demands for transport and taxation reform made by Mr. Blaikie Webster were given effect to, they would severely penalise such companies as Bulolo Gold Dredging Limited, Guinea Airways Limited, and various other con cerns concerns, operating success

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Wby Kr^°i' ld t . the ?; wh ° se . succes ® bas established the New Guinea gold in dustry’ be Penalised in order that the demands of New Guinea Goldfields Limited may be granted? This is a con sideration which surely must be disposed hpfor „ thp merits of Mr Blaikie D r o ™ls can be even ex- Webster s proposals can be even ex ammea.

Mr. W T ebster pleads for taxation reform, to ease the burden on his English share holders presumably, the gentlemen of the powerful Mining Trust. How about giving a little thought, also, to the New Guinea and Australian shareholders, who trustingly parted with their leases, etc., to Ellyu and N.G.G. Ltd., and then spent the following years hopeful, but mostly dividendless—only to see, In the end, 75

per cent, of their shareholdings disappear into the red ink?

Mr. Blaikie Webster wants concessions from the government. What about the concession under which N.G.G. Ltd. was allowed to lump together all sorts of general expenditure (even the travelling expenses of directors!) and average that off against its obligations to spend a regular annual sum individually upon the development of its numerous alluvial leases ?

It can be argued that there is no fairer method of imposing taxation on the gold industry in a young and primitive coun try, such as New Guinea, than by charg ing a royalty on gold exported. This is a method by which no company can escape its fair share of taxation. But if the tax were on profits it would be quite possible for a huge company with world-wide ramifications to escape taxation by a clever arrangement of accounts, or by muddling and mismanagement within the industry itself. Mr. Blaikie Webster complains that N.G.G. Ltd. have paid to the Administration £160,000, mostly (it is presumed) in gold royalties, while only £336,000 has been distributed to share holders. But do not those figures them selves present the very strongest argu ment why the gold royalty should con tinue? Would the Administration have received anything like £160,000 if it had been taxing on a basis of profits a com pany which was so unfortunate in its operations that it had to write off no less than 75 per cent, of its issued capital?

Mr. Blaikie Webster wants a trafficable road between the coast and the Morobe goldfield. Such a road can be built; but it has been argued, again and again, that the capital cost of constructing such a highway, plus the* enormous cost of main tenance in that broken, treacherous, sliding country, would impose upon the goldfields community a taxation burden that would be at least equal to the present cost of transporting goods and passengers by air. The plan to build a road may not be lightly dismissed; but if it is to receive serious consideration the demand for a highway should come from such concern or interest other than those represented by Mr. Blaikie Webster.

One can admire Mr. Blaikie Webster as a tenacious and tireless fighter: but it must be said that he would make more friends for his company and his enter prises if only he would recognise that there are other important enterprises in New Guinea, which earned the goodwill of the N.G. Administration by their suc cess during the years when N.G.G. Ltd. were, if anything, retarding the progress of the goldfield by “squatting” on some of the richest areas.