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

Letter SYDNEY, 3 December 1938

I desire to acknowledge the receipt of your letter of November 23rd [1], in which you stated your views-based on the result of preliminary reconnaissances by the Commonwealth Geological Adviser [2] of some of the iron ore deposits in Australia-on some technical points contained in my Note Verbale of September 8th and in a report dated August 20th presented to me by the Chief Geologist of the Nippon Mining Company [3], and which I handed to you, for your reference; together with the abovementioned Note on the subject of the embargo on the exportation of iron ore from Australia.

In view of your contentions in paragraphs 5, 6 and 7 of your letter above-mentioned, it seems necessary to make clearer the technical points set out in 4. of my Note Verbale on the deposits at Koolan Island:

The chief point of paragraph 4. of my Note was not to state that there was no wide difference in cost between underground mining and open-cut methods, but simply to stress the fact that, as, in modem mining technique, underground mining below sea-level differs very little in method and expenditure from underground mining above sea-level, deposits even below sea-level are not economically inaccessible. It follows, therefore, that deposits below sea-level should naturally and necessarily be taken into account in making a reasonable decision on such matters as the reservation of iron ore resources, or an embargo on its exportation, unless it should be the intention of the Commonwealth Government to leave undeveloped all those deposits which cannot be exploited by open-cut methods. In the latter case, the production of iron ore in Australia would be far smaller than if the embargo were lifted and the exploitation work at Koolan Island were carried on by the Yampi Sound Mining Company, which is in a position to mine economically even the iron which is below sea- level.

However, I expect that, on completion of the exhaustive survey of the iron ore resources throughout Australia-especially at Koolan Island-which the Commonwealth Government is conducting, and which will occupy a considerable time, I shall be notified of the decision made by the Commonwealth Government on the plan of compromise suggested in my Note Verbale for the reasonable settlement of this question, due consideration having been given not only to technical points, but also to the effects on the amicable political and economic relations between our two countries which might ensue should the embargo not be lifted.

TORAO WAKAMATSU

1 Document 320.

2 Dr W. G. Woolnough.

3 Document 249 and attachment.

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