Agendum 383A 10 June 1940
IRON ORE INVESTIGATIONS
On 30th April, 1940, I brought under the notice of the Prime Minister  the position in regard to the investigation of the iron ore resources of Australia. Copy of my letter to the Prime Minister and of the accompanying report by the Commonwealth Geological Adviser  are attached.
2. The Prime Minister replied on 3rd May, 1940, in the following terms:-
'With reference to your letter of the 30th April, in connection with the iron ore deposits of Australia, I have asked the Ministers for Trade and Customs, Supply and Development, and External Affairs, and the Treasurer to carefully consider the various phases of the matter from their departmental points of view and to confer with you subsequently in the preparation of a recommendation to Cabinet.
The Ministers have been requested to treat the matter as one of urgency.' 
3. The Commonwealth Geological Adviser reports that investigations have revealed the following facts:-
(1) Numerous small, scattered sources of supply are too isolated to be capable of meeting the necessary overhead expenses for their economic development and exploitation.
(2) Large deposits far inland and far removed from suitable fuel supplies cannot be worked economically for many years to come;
since the railway freight involved would make the ore prohibitively costly when delivered at the blast furnace; or, alternatively, would cause too much loss to the railways if carried at unremunerative freight rates.
(3) Many reputedly large and rich deposits nearer the coast proved, on close examination, to be of negligible size and importance. (Specifically, this statement applies, in addition to others, to supposed major deposits in Tasmania and New South Wales, to others on the shores of Spencer's Gulf in South Australia, and to deposits in Cape York Peninsula, Queensland.) (4) Two groups of deposits, only, possess all the requisites of size, quality and economic accessibility to render them capable of profitable exploitation on a large scale under existing or predictable conditions in Australia. These are- (a) the Iron Knob group of deposits in South Australia;
(b) the Yampi Sound group of deposits in Western Australia.
4. The Commonwealth Geological Adviser states that the maximum amount of ore available at these two deposits under the most optimistic estimates possible is:-
Iron Knob group 200 million tons Yampi Sound group 150 million tons Total 350 million tons.
5. If, however, more conservative estimates of economically available ore are accepted the quantities would be:-
Iron Knob group 150 million tons Yampi Sound group 50 million tons Total 200 million tons.
6. The consumption last year in Australia was 2 1/4 million tons.
The Commonwealth Geological Adviser, however, states that with the completion of a new blast furnace at Whyalla, South Australia, the 3 million ton mark will be passed very shortly. The major engineering commitments of the immediate future (bridges, battle- ship dock, etcetera) and the development of great industries such as aeroplane building, motor car construction, armaments, etcetera, indicate that a demand of at least 5 million tons of iron ore a year must be reached almost immediately. In view of the peculiar natural advantages enjoyed by Australia in the Pacific region, it is highly probable that the demand will exceed 10 million tons a year within a decade.
7. It can be expected, therefore, that at the outside the economically exploitable iron ore deposits will not last for more than 70 years.
8. A decision as to the necessity for the retention of the embargo is urgently awaited for the following reasons:-
(1) The operating Company at Yampi Sound, the Yampi Sound Mining Company, is carrying on at Koolan Island at the expense of the Commonwealth, which is approximately 3,000 a month.
(2) The testing operations for which an arrangement was entered into between the Commonwealth and the State Mines Department, providing for the engagement of the Company, have now been completed.
(3) Under the arrangement, the Yampi Sound Mining Company is entitled to two weeks' notice of the termination of the engagement. Pending a decision by the Government, it will not be desirable to give notice.
(4) Cessation of operations at Yampi Sound will throw out of employment some 50 workmen and possibly office staff of the Company in Perth. Until a decision has been reached by the Government, the Company is uncertain as to whether its organisation should be disbanded or not.
(5) On behalf of Japanese interests who, it is stated, have invested a sum of the order of 300,000 in the undertaking, the Japanese Government is pressing strongly for a decision (see attached copy of a letter dated 5th June, 1940, from the Consul- General for Japan). 
9. As stated in my letter of 30th April to the Prime Minister, the question relating to the embargo is one which involves considerations which do not really come within the province of my Department, the function of which is primarily to carry out through the Commonwealth Geological Adviser the survey of the iron ore resources of Australia. My Department, however, is vitally concerned with the arrangement entered into with the Yampi Sound Mining Company which, in turn, is involved in the situation with Japan.
10. I, therefore, submit for Cabinet's consideration the question as to whether the embargo on the exportation of iron ore is to be continued. In view of the advice tendered by the Commonwealth Geological Adviser I am strongly of the opinion that the retention of the embargo is essential in the future economic interests of Australia. 
H. S. FOLL