States Senate Committee on Banking and Currency will be visiting Venezuela on December 2d, and some of the members are planning to visit our Arrecifes powerplant. We take pleasure in enclosing a copy of the letter addressed to Mr. Lynn U. Stambaugh, Deputy Director of the Export-Import Bank of Washington, whereby we invite the committee to visit the plant and to have lunch in a club nearby. We would feel very much honored to have the pleasure of your visit. Regarding the possibility of testifying in person before your committee, naturally, I would be glad to do so, however, on account of the distance and engagements in Venezuela, I would hesitate accepting a firm commitment at this date. Very truly yours, OSCAR A. MACHADO, General Manager. Senator BENNETT. Our next witness if Mr. Gordon Watson, general counsel of the Steep Rock Iron Mines, Ltd., of Ontario, Canada. Mr. Watson, do you have a prepared statement? STATEMENT OF GORDON WATSON, GENERAL COUNSEL, STEEP ROCK IRON MINES, LTD., STEEP ROCK LAKE, ONTARIO, CANADA Mr. WATSON. I do not, Mr. Chairman. Senator BENNETT. Will you proceed in your own way. Mr. WATSON. My name is Gordon Watson. I am general counsel of Steep Rock Iron Mines, Ltd. That is a Canadian company carrying on a business of operating mining properties in Canada. The company is a privately owned company with approximately 12,000 to 13,000 shareholders of whom approximately one-half are persons living in the United States and the other half are persons living in Canada. The respective shareholdings are divided almost equally between Canadian and American shareholders. The mining properties which the company operates are located approximately 140 miles west of the west end of Lake Superior and roughly 40 miles north of the border between the United States and Canada. In 1943 the original financing of the company was greatly assisted by a $5 million loan from the Reconstruction Finance Corporation. Five years later it was ascertained that in order to get the company into efficient and economical operation it would be necessary that substantial further funds be provided. Careful investigation was made of available sources both in Canada and in the United States. After exhaustive inquiry it narrowed down to the finding that unless funds could be made available by the Export-Import Bank it was unlikely that the project could continue on the anticipated basis. In 1948, approximately $3 million of junior capital was raised with very considerable difficulty, and the Export-Import Bank provided an additional $5 million. The loan was made by the way of a direct loan by the Export-Import Bank to the limited company without Government intervention. Very careful investigation was made by engineers and financial experts on the staff of the Export-Import Bank, and it was of great assistance to the Steep Rock Co. to have the advantage of the opinions and the assistance of the experts from the bank in planning the future of the company. With the assistance of the loan the mining operations were very substantially expanded and plans for opening new ore bodies were gotten under way. In 1951, however, complications in connection with the development of the mine arose. Some expenditures which had not been anticipated were brought forward at an earlier date than had been counted upon, with the result that further funds then had to be made available. Again, with the cooperation of the officials of the bank, approximately $3 million of maturities of the bonds were postponed and $700,000 that had been repaid on the mortgage was again advanced to the company, making the total loan $10 million. With the funds available the company has been able to go ahead with its development plans and is now in a very sound operating position. I think it might be important, Mr. Chairman, to stress the importance to the company of the flexibility which was found in dealing with the bank as the development of the mining operation occurred. As you can well appreciate, Mr. Chairman, in the development of a mining range things happen unexpectedly and expenditures in very substantial figures are encountered which have not been counted on. If one is depending on private banking arrangements, as you know, it is necessary to know beforehand what the expenditures will be, and it is very difficult to change them afterward. In dealing with the Export-Import Bank we found we were able to bring our problems to the bank, explain to them what the difficulties were, and find a flexibility of operation in the advancing of funds which in our opinion would have been utterly impossible in the case of private banking. One other circumstance which illustrates that is a situation which arose in connection with the Inland Steel Co. They made an arrangement with the Steep Rock Co. to explore a substantial part of the Steep Rock Range under an option agreement, and subsequently arranged to take up that option and are now engaged in a mining operation of their own adjacent to the Steep Rock property. In connection with that development, it was first necessary to discuss with the Export-Import Bank the possibility of so arranging the security of the bank loan so that the new mining operation could be safely undertaken. Subsequently, the Inland Steel Co. itself arranged to make an advance against anticipated royalties in a very substantial sum of money about a year ago. There again it was necessary that careful and intelligent cooperation take place between bank officials and the company officials so that the bank loan could be adequately secured and yet permit the Inland Steel operation to go ahead without prejudicing the security of the investment which Inland was making. In those cases we had the fullest cooperation of bank officials in a manner which, in our judgment, would not have been possible if it was necessary to deal with the wider holdings by individuals or corporations. The result of the investment in Steep Rock has been that approximately 9%1⁄2 million tons of high-grade ore have been made available in the past 10 years. Roughly, 95 percent or more of that tonnage has gone to steel consumers on your side of the line, in the United States. It is anticipated that the production from the Steep Rock area, which last year was 1,300,000 tons, will in the case of the Steep Rock operated mines be increased to 51⁄2 million tons, and that, too, will be 42493-54-pt. 1-20 augmented by a further production from the same range of 3 to 4 million tons from the Inland operated properties. Of course, the 3 to 4 million tons of Inland ore will go to American consumers. It is anticipated that almost the entire tonnage from the Steep Rock mine will continue to funnel to United States consumers. From the Canadian side of the picture, the result of the investment which has been made in the Steep Rock mine has been to make available United States dollars to feed into the Canadian economy. At the present time you will appreciate the problem is not so acute as it was at the time the loan was made. At that time the significance of available United States dollars to Canadians to stimulate the activities of the best customer of the United States was very significant. Of the funds which will be made available from the United States for the purchase of Steep Rock ore, I think it may be safely counted that a very substantial amount will flow back into the United States for the purchase of United States goods and services. It might be of interest to the committee to know that when the Steep Rock mine started up the community in the district was simply a little town or hamlet of 300 people. At the present time there is a thriving community of 4,500 people and the best estimate is that within a few years there will be a city of 20,000 people located in what was the wilderness some years back. The community has all the amenities that one could hope for, hospitals, theaters, hotels, and all things that are necessary to make a happy life in a wilderness. Those of us who are associated with the Steep Rock Co. are very happy to have this opportunity of appearing before this committee and expressing our appreciation of the consideration, and our acknowledgment that the advance we received from the Export-Import Bank, and the amendments and further advances from them, made possible the development of this community and the commercial enterprise which is now thriving. May I say in conclusion, Mr. Chairman, that in our experience with the Export-Import Bank the correspondence we had with them has been handled promptly and satisfactorily and that the investigation of our problems has been thorough and efficient. The loan application and the amendment thereto were at all times handled expeditiously and efficiently, and through the activities of the Steep Rock loan we feel that the Export-Import Bank has aided in financing and facilitating the export-import trade of Canada and the United States, and has assisted in developing and expanding the economy of our country and the trade between our country and yours. Thank you, Mr. Chairman. Senator BENNETT. Senator Payne, do you have any questions? Senator PAYNE. No. Senator BENNETT. I have just one or two questions. As I listened to your explanation, I assume that the Steep Rock Iron Mines, Ltd., particularly in the Steep Rock area, is, as we might say, over the hump? Mr. WATSON. I think that is so, Mr. Chairman. Senator BENNETT. That the development is now on a sound and secure basis and you do not anticipate at this point requesting any additional funds from the Export-Import Bank? Mr. WATSON. That is quite correct. It is hoped from now on that private banks can take over. The period in which flexibility was required, I think, is now past. Senator BENNETT. I am just curious to know whether you plan to hurry up your withdrawal from the Export-Import Bank so that perhaps those funds can be added to the bank's present loaning limit and put to work somewhere else. Mr. WATSON. I think at the present time the bank is hoping to dispose of its investment in the Steep Rock Co., Mr Chairman, to private interests. Senator BENNETT. Without any action on your part? Mr. WATSON. With our concurrence, of course, Mr. Chairman. They have considered our case and made inquiries to ascertain that the disposition they propose is satisfactory to the company. Senator BENNETT. The loan is in such shape that it can be disposed of; there is a chance that it can be disposed of? Mr. WATSON. A very good chance, Mr. Chairman. Senator BENNETT. The committee has a letter from the Steep Rock Iron Mines, Ltd. dated September 9, 1953, and signed by Mr. Fotheringham, president and general manager, in response to the questionnaire, which I would like to put in the record at this point in the testimony. Thank you very much, Mr. Watson. Mr. WATSON. Thank you, Mr. Chairman. (The material referred to follows:) STEEP ROCK IRON MINES, LTD., Senator HOMER E. CAPEHART, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SIR: In response to your inquiry of September 3, we are glad of the opportunity to cooperate with you in gathering information and opinion with respect to the Export-Import Bank of Washington. We have had no contact with the International Bank for Reconstruction and Development, and are therefore unable to offer any comment on that institution. Referring to your specific questions respecting the Export-Import Bank, we can advise as follows: 1. In 1943 and subsequently our company received from the Reconstruction Finance Corporation loans in the aggregate of $5 million, which constituted part of the moneys required for the development of large deposits of high-grade iron ore located in the bed of Steep Rock Lake. With this loan our first open-pit mine was brought into production and additional ore deposits were successfully explored. Because of the declining reserves of high-grade ore on the Mesabi Range and the urgent need for bolstering the North American iron ore supply, it was deemed advisable to extend the development of the Steep Rock Iron Range. Accordingly in 1948 we approached Reconstruction Finance Corporation and the Export-Import Bank in connection with provision of a portion of the required expansion funds. 2. We have had extensive correspondence with the Export-Import Bank as well as numerous conferences with their officials, and have consistently found them to be reasonable, businesslike, and diligent in their correspondence and interviews. 3. As indicated in (1) above, we applied in 1948 for a $5 million loan from the Export-Import Bank. 4. Our application was granted, and was handled courteously and with dispatch. 5. The $5 million credit advanced by the Export-Import Bank has, in our opinion, been administered consistently in a very efficient manner. Investigations made by the bank officials prior to granting the loan were thorough. They have kept in touch with our activities consistently, and have done whatever was possible to insure the efficient development and operation of the mines and to protect their investment. 6. We have no complaints about the operations of the bank. 7. In our judgment, the Export-Import Bank has aided materially the exportimport trade of the United States. 8. We believe that the bank has assisted materially in developing and expanding the economy of friendly foreign countries. In our case, the loan received from the Export-Import Bank was an important factor in the successful development of the Steep Rock Range. When our property has been fully developed we anticipate that there will have been a total capital investment in excess of $100 million, and the annual gross value of the iron ore produced here in due course will exceed $100 million. The bulk of our production is exported from Canada to steel mills in the United States, and the bulk of our mining equipment originates in the United States. 9. We have found the policies of the Export-Import Bank to be consistently sound, and have no specific suggestions for modification of bank policies. 10. We believe that the Export-Import Bank has materially assisted the expansion of international trade. We understand that the Reconstruction Finance Corporation is to be dissolved, and in that event we suggest that the Export-Import Bank might properly absorb the Self-Liquidating Division of RFC insofar as foreign credits are concerned. We are firmly of the opinion that the economic concept behind the ExportImport Bank is sound, that their policies have been sound and internationally beneficial, and that their officials have consistently demonstrated good business judgment. You inquired whether it would be possible for me to testify before your committee. We desire to cooperate with you in every possible way, but unfortunately pressure of work at the property would almost certainly prevent my attendance in Washington for such purpose during the next several weeks. I would be glad, however, to endeavor to supply by letter such information as you may require. Sincerely yours, M. S. FOTHERINGHAM. Senator BENNETT. The next witness is Mr. Lansdell K. Christie of the Liberia Mining Co., Ltd., New York City. Do you have a prepared statement? STATEMENT OF LANSDELL K. CHRISTIE, PRESIDENT, LIBERIA MINING CO., LTD., NEW YORK, N. Y. Mr. CHRISTIE. No, I do not, Mr. Chairman. Senator BENNETT. You may identify yourself for the record and proceed in your own way. Mr. CHRISTIE. My name is Lansdell K. Christie. I am president of the Liberia Mining Co., Ltd. Our company was formed in 1946 for the purpose of developing an iron deposit in Liberia. As the founders of the company first studied the project, we grew to realize that it answered quite well to the terms of reference of the Export-Import Bank. As we devised a general structure for the financing of it, we planned on endeavoring to secure a loan from the bank. We did approach them at the proper time. We found the bank receptive to the idea. They, too, felt that it subscribed very well to their general policies. We would spend $6 million or $7 million in the United States for equipment, as we planned the project, and in addition would bring about a flow of iron ore to the United States. Over a period of probably a year we were in close association with the bank. We found it to be very conscientious, very hardheaded, but still with a willingness to entertain a reasonable project with, I might say, a minimum of risk that was inherent in it. As the matter progressed the officials of the bank put stipulations on us, some of which were perhaps a little difficult to meet. But by |