Threatened

Pacific Gold Industries

British Policy Could Kill Fiji and N. Guinea Enterprises

THERE recently has been distributed, in the South Pacific, copies of a ‘Memorandum on Colpnial Policy,” issued by the British Colonial Office. It obviously was written by a learned, Left-

ist clerk —probably one of the University products which plague Government De partments nowadays—and it describes itself as “a broad general statement of policy.”

It is a very lengthy document, and not easy to summarise. It painstakingly de velops the argument that mining com panies should not be allowed to enter British colonies, receive rights over min eral deposits there, and carry off all the rich profits of the industries they estab lish. A substantial part of the profits, it says, should generally be retained for the benefit of the inhabitants of that colony.

The writer is sure that valuable min erals could be found, and sound indus tries established on the mining fields concerned, by Government enterprise— thus cutting out “exploitation” by pri vate individuals at a colony’s cost.

The Memorandum says: “Mining should be carried on according to a de liberately-planned programme, and its social consequences carefully foreseen and directed, so that the evils of unregu lated development and consequent social distress, and effects on agricultural vil lage life, and diversion of manhood, do not arise.”

OUR learned clerk is interesting on the the subject of royalties. He argues that the system should be changed: “In most colonies each mineral pays a standard rate of royalty, and there is no variation from lease to lease. As a re sult, lessees on the one hand will be unwilling to extract low-grade ores, so that the Colony thereby fails to realise part of its assets; and on the other it will pay less on rich ores than the de posits could bear. Both these evils are avoided by the levying of royalty on the profits earned on the capital employed on mining operations, after making allowance for amortisation.

“The question of adopting such a sys tem in connection with gold mining in Tanganyika and Fiji is at present under consideration; and if it is found practic able, in those cases, the possibility of its extension to other forms of mining will be considered in due course.”

Which, of course, spells the doom of the mining industry in Fiji. But the learned clerk goes blithely on to other allied matters. For instance: “In con ditions in which a concession would tend to give a mining company a dominant place in a Colony’s economy, the Gov ernment may think it proper to stipulate, as a condition of the concession, that it should have the right to nominate one or more directors; and that such nom inee should have full access to all the company’s documents and accounts.”.

Then, he goes on to argue that, in the interests of planned economy, the rate of “exploitation” of mining concessions should be rigorously controlled by the Government —instead of encouraging ex pansion, the Government might find it desirable to slow down operations, so that the industry will last longer and the revenue taken from it by the Gov ernment be available over a greater

period.

(Continued on page 73)

AS the Memorandum probably is now in the hands of the Australian Gov ernment, and may influence its New Guinea policy, the following paragraphs relating to “the financial proceeds of mining” are interesting: “Broadly speaking, a Colony’s share of the proceeds of mining is comprised in the proportion of the working costs ex pended within its boundaries, in taxation and in royalties. Of these three sources the first is, from the narrow point of view of government finance, an indirect and the other two are direct sources of revenue, “From the point of view of the Colony as a whole, however, all three are sources of profit, and as the first is usually the largest it .should be a matter of particu lar care to the Government. In other words, it is in the interests of the com munity to ensure that the total proceeds are as large as possible even if, on occa sion, it is necessary to sacrifice part of the proceeds of direct taxation to achieve this end.

“So far as working costs are concerned, they will be importantly influenced by the extent of the Government’s inter vention in regard to such matters as rates of wages and the provision of medi cal services and other amenities by the employers. The object of the Gov ernment in intervening in such matters is, however, to secure proper conditions for the labour force, not to inflate work ing costs. The latter is incidental to, not the purpose of their intervention.

“Obviously, an undue inflation of working costs either by unreasonable de mands by a Government or by extrava gant expenditure by a management may have such an unfavourable effect on the industry as to reduce the net benefit to the community instead of increasing it.

“As regards taxation, this usually takes the form of export duties and income tax or other taxes on profits. The general aim here should be to establish a system of taxation of sufficient flexibility to meet the changing fortunes of mining.

“Freedom of action in this respect is particularly desirable in cases where mines operate under long leases. In such cases, the Government should, where the rate of royalty in the lease is unreason ably low, secure an adequate return by the levying of an export duty in addi tion to the royalty. In new leases, how ever, the situation would be met by in cluding provision for a review of the rate of royalty at comparatively short intervals.”

THE Memorandum represents such a completely unreal approach to a subject of much importance to most countries that it is difficult to make any detailed comment upon it.

If the establishment of mining indus tries by private enterprise—what our policy writer calls “exploitation”—meant that a man or a corporation with ade quate funds simply went ta a selected spot and proceeded, in an organised and orderly manner, with the recovery and sale of valuable metals, then the Mem orandum might represent an admirable enunciation of policy.

But mining—and especially gold min ing—is nothing like that. It is usually an adventure and a mad gamble, in which men risk all they have, including their lives. They take those risks be cause, if they “strike it lucky,” they become rich and independent. Behind nearly every mining industry now suc cessfully operating in South Pacific coun tries to-day—including Australia and

New Zealand —there is a tragic history of risk, and struggle and loss. For every gold mine brought to the payable stage there are scores of mining enterprises in which men risked their all, and lost.

Take, for example, the now rich gold fields of New Guinea and Fiji. There would have been no gold industry in New Guinea if the thing had depended on Government enterprise. Edie Creek was found because men, lured on by thought of rich reward, gambled their lives against the jungle, diseases and savages of an indescribably difficult terrain.

There would have been no Bulolo if Cecil Levien and his Adelaide friends had not been prepared to gamble every thing they had on their faith in aero planes and dredges—a gamble derided by all the wise and clever men of that day.

There would have been no Emperor and Loloma mines in Fiji to-day if Pat Costello had not gambled on Prospector Borthwick, and if E. G. Theodore had not put his faith and his money into the development of an ore that most mining experts had rejected. Where a few mines prospered in New Guinea and Fiji, hun dreds of enterprises were wrecked, and incalculable sums were staked, and lost.

Would these things have been done by Government enterprise?

None of those mining industries would have been developed and established if the Governments concerned had placed restrictions upon the explorers and pros pectors, and tried to “control” the com panies which developed their finds.

THE Administrations which controlled these Pacific Territories before the Red Planners got into power were far too wise to try to put a halter on min ing enterprises. Instead, they encour aged and helped them in every possible way. They knew those industries could be developed only if men were given the utmost freedom to gamble; and, when the gamble succeeded, thev were happy that their Territories should get their share of the prize, in the shape of in creased trade, increased revenue in a dozen indirect directions, and some direct taxation.

But, always, the direct taxation of min ing enterprises was something under taken with great caution—because min ing men, at the slightest suggestion that bureaucracy was trying to get a direct

share of their all-too-rare prizes, would “curl up” and withdraw their enterprises.

The brilliant young planners of the New Order have no such wisdom or cau tion. Not only are they going to kill the geese which lay the golden eggs—they most definitely are going to discourage the entry of other geese to their Terri tories.

WE have had some illuminating events in Fiji. The Mount Kasi mine has closed down. There is a lot of country under lease to Mount Kasi that seems just rich enough to be worth ex ploration; but, as the ore probably would be low value, Mount Kasi will not ex plore, with a view to continuing the in dustry, unless it can get certain guar antees from the Government regarding future taxation.

A well-known Canadian gold-seeking enterprise, after careful inquiry, decided not to proceed with exploratory work in Fiji, because of the uncertain outlook regarding taxation.

The directors of the soundly-estab lished Emperor and Loloma mines have had endless troubles because of the frantic eagerness of the Government of Australia (where most of the shares are held) to tax their profits. The directors have preferred to pay the Fiji scale of taxation on their profits, and distribute no dividends, keeping their funds in Fiji rather than distribute the profits and allow the merciless Australian tax-gath erer to get a huge share of them. That was a sound and wise procedure—but, now that a new policy is being forced on Fiji by the Leftist planners of Whitehall, another situation is developing. If the policy outlined there is to shape taxation in Fiji in future, the Vatakoula mining industry will certainly be restricted and probably will close up.

Already, the Emperor-Loloma interests have withdrawn from the Solomons —and the Guadalcanal gold will remain in the ground, instead of becoming the basis of an industry that could enrich that Cin derella Territory.

Mining men, whether in Fiji or New Guinea or Timbuctoo, will not tolerate the interference of stupid and unrealist bureaucrats. There is every possibility that Fiji’s gold industry, the production of which, at £1,000,000 per annum, was running sugar a close second n 1939, will have been driven entirfily out of the Colony by 1949.

FIJI provides the New Guinea gold in dustry with the red flag of warning.

What is happening in Fiji to-day, under London’s Socialistic direction, almost certainly will happen in New Guinea to-morrow, under direct instruc tions from Canberra.

The New Guinea gold companies, be fore committing themselves to heavy ex penditure in the restoration of their in dustry should—if it is not too late— obtain definite guarantees from Canberra regarding future taxation.

The Colonial Office Memo on Mining Policy, in thought and phraseology, could easily have been written bv Mr. Conlon, that clever young Sydney University medical student who, with the rank of Colonel and the status of Director of the Army Research Council, had so large a share in drafting the new Territories policy for Mr. Eddie Ward.

The “PIM” interviewed Mr. E. G. Theo dore, head of the Fiji gold companies, and asked him what he thought of the Mining Policy Memo. He obviously was not happy about it, but he would say little. What he did say, however, was to the point.

On the statement that “mining should be carried on according to a deliberately planned programme,” Mr. Theodore said:

•‘This is impracticable in undeveloped Territories, like the Solomons, where there are no Government organisations capable of planning for mining—or in Fiji, where there is only the nucleus of a Government Mines Office. Expert planning in Fiji depends upon the ex pert staff of the mining companies.

They have planned a programme of ex ploration, prospecting and deep drilling, which will take four years to complete, and will be carried out by geologists and mining engineers at a cost of not less than £100,000.”

Concerning the Memo’s insistence that the profits of the mine industry should be used to provide amenities (education, health, sanitation, housing, etc.) for the populace: “All these factors are carefully attended to already by the mining com panies operating at Vatakoula, in Fiji— and, indeed, on the initiative of the com panies themselves, and not at the insti gation of the Government. The Govern ment has never gone out of its way to give one word of praise of what has been done.”

On the dictum that “an exclusive license to work all minerals should not be granted—a mining lease should gen erally cover one mineral only, or min erals found in association”: “This can be absurd. If a lease is granted for the working of a silver lead lode (lead group) will a lease be granted to some other company to work, say, copper on the same area? Mount Isa Mines, working a silver lead-zinc lode on its leases discov ered a rich copper lode at 700 feet.”

Concerning the Memo generally: “This Memo is written, I should think, mostly with a view .to backward colonies and territories; but it has been sent to all Colonies, including Fiji, without any qualifying statement to the effect that most of the policy outlined—at any rate, the practicable parts of such policy— are known to be already in force in Colonies such as Fiji. But perhaps the Colonial Office does not know this!”

Mr. James Crawford, formerly on the staff of the Bank of New Zealand, Suva, was a passenger on the ‘‘Wanganella” which passed through Suva, Fiji, in December. He was returning from a trip to England and Ireland and is now on transfer to one of the New Zealand branches.

It was announced in London in Decem ber, that the post of Chief Representative of the British Council in the West Indies had been abolished as from September, 1946. The position was created early in the war period and it was held by Sir Harry Luke, KCMG, who was Governor of Fiji from 1938 until 1942. It is pre sumed that the Council is being super seded by the agreement between United States, Great Britain, France and Hol land, which establishes the Caribbean Commission, the Caribbean Research Council and the West Indian Conference,