203 Mr J. A. Lyons, Prime Minister, to Mr Torao Wakamatsu, Japanese Consul-General in Sydney

Letter 18 May 1938,

With further reference to your letter of 11th April, 1938 [1], and to previous correspondence on the subject of iron ore, I have the honour to inform you that this matter has now received full and careful consideration by the Government. The closest attention was given to the particular points raised in your letter of 5th April [2] and in that now under reply.

The best expert advice available has been obtained, and in the light of this advice the Government is satisfied that the accessible iron ore deposits of Australia which are capable of economical development are so limited as to compel their conservation for Australian industrial requirements. You will recall that I gave expression to our concern in this regard in my letter to you of 29th March. [3]

Copy of a report by the Commonwealth Geological Adviser on the subject of iron ore is attached.

Careful consideration has been given to the proposal that licences should be granted to export limited quantities of iron ore, but the Commonwealth Government has come to the conclusion that such action would be inconsistent with the necessity to conserve Australia's limited iron ore resources.

For these reasons I am very reluctantly obliged to inform you that the Commonwealth Government feels that it has no alternative but to prohibit the export of all iron ore from Australia, and a proclamation to this effect will be issued to take effect as from 1st July, 1938.

During the early stages of Messrs Brasserts' [4] activities at Koolan Island no doubt existed as to the adequacy of our iron ore resources, and, in consequence, the Government made no demur to the proposed enterprise. It has been only as a result of investigations which have recently taken place, and which I may say were initiated owing to apprehension expressed by experts, that the necessity for our intended action has become apparent.

I note from your letter of 5th April, that the expenditure in connection with Koolan Island is already substantial. The Government will be prepared to examine and consider equitable claims for reimbursement of expenditure which has up to this date actually taken place in connection with development operations directed towards the exploitation of our iron ore resources for export.

We sincerely trust that the interests concerned will appreciate that the Commonwealth Government is acting only with the gravest sense of responsibility and we assure you that we regret exceedingly that the decision may indirectly affect Japanese interests. We hope, however, that the action which our duty compels us to take will not impair the cordial and friendly relations which have so long and so happily existed between our respective countries.

J. A. LYONS

1 Document 184.

2 Document 178.

3 Document 171.

4 Messrs H. A. Brassert & Co. Ltd, a British firm of consultative engineers.

Attachment

Report by Dr W. G. Woolnough

14 April 1938 [1]

REPORT ON THE TECHNICAL ASPECTS OF IRON ORE RESERVES IN AUSTRALIA

Any estimate of the availability of iron ores in Australia must be based upon the fundamental economics of the question, and cognisance must be taken of physical conditions peculiar to Australia.

The following considerations must be given due weight:-

1. Iron ore, even of high grade, is intrinsically low in value, therefore mining and transportation must be as cheap as possible.

2. A high degree of purity is desirable so that metallurgical costs may be reduced to the lowest limit, and a minimum of barren material dealt with.

3. Relatively large supplies of uniform quality must be assured so that rapid variations in metallurgical practice may be avoided.

4. The capital cost of the essential metallurgical installation is so high that continuity and uniformity of supplies must be ensured for a period sufficiently long to cover the amortisation of the capital expended.

These fundamental demands can be met, especially in the case of infant iron industries like that of Australia, only by a fortunate concurrence of favourable factors. It is economically impossible to consider deposits of less than about 20 million tons of ore, containing a high percentage of iron, and free from notable amounts of such objectionable constituents as silica, titanium, sulphur, phosphorus and copper. Some manganese may be present with advantages, but an excess is objectionable.

Workable deposits must be so situated as to be within economical transportation radius of adequate supplies of coal of just the right quality. In existing conditions, only deposits favourably situated for water transportation are economically possible of exploitation.

Mining must be exceedingly cheap and, until the industry has become maturely developed, must be confined to open-cut methods.

In Australia there are only two groups of iron ore deposits which satisfactorily comply with all these conditions, namely, the Iron Knob Group in South Australia and the Yampi Sound Group in Western Australia.

Many other important iron deposits are known to exist, but all of these exhibit one or more characteristics excluding them from economic consideration at present, or in the immediate future.

The Mt Philp deposit of the Cloncurry district, estimated at 20 million tons, is some 400 miles inland-beyond the economic transportation limit.

Iron Range, near Portland Roads in North Queensland, is large in size, but so far as is known at present inferior in quality.

The Cadia deposits in New South Wales are the extreme limit of economic transportation, and, in existing conditions, cannot compete with seaborne supplies from greater distances.

Victoria possesses no major deposits.

In Tasmania, the Blythe River deposits are of considerable dimensions, but recent investigations have thrown grave doubts upon both quantity and quality of the ores.

Other deposits of economic importance may exist in Tasmania, but extended surveys and explorations are necessary to determine their quality, quantity and availability.

In South Australia, the only major accessible deposits are those of the Iron Knob Group. Official estimates of tonnages available lie between 150 million and 200 million tons. These deposits do and must unquestionably constitute the backbone of the Australian iron industry for a long time to come. Unfortunately, the largest deposits of the group show an increasing percentage of manganese, to more than the admissible limit, with increasing depth of exploitation. This must be counteracted by dilution of the ore with other iron ore low in manganese, since the manganese cannot effectively be removed in smelting.

It is largely for the reason mentioned in the preceding paragraph that the Yampi Sound deposits, until recently regarded with comparative indifference by Australian iron-masters, have quite suddenly taken on greatly enhanced importance. No other completely adequate source of supply of low-manganese ore is actually available or immediately probable within the Australian region.

The Yampi Sound deposits have been variously estimated to contain from 63 million to about go million tons of ore. These estimates, however, assume a depth of profitable mining which is almost certainly excessive in existing economic conditions in Australia.

Very large tonnages of iron ore are known to exist in the interior of Western Australia, but none of these is comparable in respect of transportation even with the Cadia deposits of New South Wales.

In the circumstances, then, and until the whole question has been clarified and stabilised. by a critical survey of all reasonably probable sources of supply of ore, it is absolutely essential, from the purely technical aspect, that steps be taken to conserve the iron ore reserves upon which must rest to a very large extent, the future industrial development and prosperity of Australia.

The world trend at the present time is towards rapid increase in the development of iron industries in those countries possessing the two absolute essentials of adequate ores, and, above all, suitable fuel supplies. Australia possesses the latter. As pointed out above, however, the ore supplies appear to be definitely limited.

Nevertheless, the fuel factor alone makes it certain that our juvenile iron industry must expand rapidly.

At present we are using over two million tons of iron ore a year.

In view of the expansion of the iron and steel industries of Australia which has taken place in the last few years, and the practical certainty of further large expansion within the next few years, it is certain that if the known supplies of high grade ore are not conserved Australia will in little more than a generation become an importer rather than a producer of iron ore.

From their very nature iron ore deposits of dimensions worthy of consideration in the present survey form topographic and geological features so exceedingly conspicuous that it is beyond the bounds of possibility that there exist anywhere within the accessible portions of Australia undiscovered accumulations of such ore of noteworthy dimensions.

That other countries are looking towards Australia for supplies of ore emphasizes the fact that the known circum-Pacific iron ore reserves are very inadequate, and suggests that we must in the interests of our own industries, conserve all supplies of iron ore which are favourably situated.

W. G. WOOLNOUGH

[AA : A1608, C47/1/4, iii]

1 Although dated 14 April 1938 the copy of the Woolnough report sent to Wakamatsu contained a number of minor textual alterations made probably on 18 May. These alterations are listed in a cablegram from Lyons to Page on 18 May 1938 (section not printed;

see AA : A1608, C47/1/4, iii]. For the original version of the report see AA : AA1972/341, box 6.

[AA : A981, AUSTRALIA 90]