I have the honour to acknowledge the receipt of your letter of
March 29th [1], in reply to my letter of March 26th [2], regarding
the matter of iron ore.

Having noted, with appreciation, your assurance that, in
considering future action by the Commonwealth Government in regard
to this question, full cognizance will be taken of the situation
which already exists, and of the special circumstances surrounding
the working of the deposits at Yampi Sound, I deem it opportune to
bring under your notice the results of my inquiries relative to
the circumstances in which the preparatory work for the
development of the Koolan Island iron ore deposits was inaugurated
and is now being carried on.

I have studied the original Memorandum of Proposals, setting out
in detail the proposals which were submitted early in 1936 by the
leaseholders, Messrs H. A. Brassert & Co. Ltd, London, to the
Western Australian Government, and understand that the terms of
these proposals have in no way been departed from, and were, in
due course, approved.

The submission of the Proposals was a matter of the greatest
importance for many reasons, and had they not received the
approval of the Government referred to, any attempt to develop
Koolan Island iron ore deposits would have been immediately
abandoned.

May I draw your attention to the fact that the leases were to be
developed by an Operating Company formed by Messrs H. A. Brassert
& Co. Ltd, and that loan capital to the extent mentioned in the
Proposals was to be furnished by the Nippon Mining Co. Ltd, which
loan capital (furnished for the reasons set out in the Proposals)
became repayable to Nippon Mining Co. Ltd with interest, over a
period of years.

It is proper to mention here, that the development in question is
an undertaking of considerable magnitude, capable of being handled
economically only in enormous tonnages; this point was well known
to all parties from the outset.

Armed with the assurances so promptly given (and on many occasions
since repeated), the Nippon Mining Co. Ltd felt itself at liberty
to proceed with the utmost confidence, and to expend very large
sums of money on the development of the deposits.

Messrs H. A. Brassert & Co. Ltd paid 35,000 for the leases, and
also paid certain other preliminary expenses in the neighbourhood
of 50,000-in all 85,000.

The Nippon Mining Co. Ltd has spent about 260,000, and also
undertaken inescapable commitments amounting approximately to
300,000.

In addition, the Nippon Mining Co. Ltd not only proceeded with the
construction of blast furnaces (now nearing completion) at Osaka,
in co-operation with another company, but also induced the Yawata
Iron Works to make elaborate preparations in their blast furnaces
to receive ore from Koolan Island in large quantities (based on
the tonnages set out in the Memorandum of Proposals): further,
additional furnaces are now in course of construction at Yawata
for the receipt of Koolan ore.

Apart from the smelting programme, the Nippon Mining Co. Ltd has
entered into a contract with its sister Company, the Nippon
Industrial Shipping Co. Ltd to make all necessary preparations for
the transport of Koolan iron ore to Japan. In pursuance of this
contract considerable expenditure has been incurred, which must be
borne by the Nippon Mining Co. Ltd should the leaseholders be
rendered incapable of providing the ore for shipment from Koolan.

I feel it my duty to point out here that the strictest control had
been exercised by the Japanese Government from the beginning of
the year 1936 over the export of Japanese currency to foreign
countries, but, in view of the fact that the Yampi negotiations
had been under discussion at great length prior to that date, and,
relying with the greatest confidence on the assurances of the
Commonwealth Government and those of the Western Australian
Government, that the programme detailed in the Memorandum of
Proposals submitted would in no way be interfered with, the
Japanese Government, granting special consideration to the Koolan
Island project, permitted the export of currency from Japan to the
above-mentioned amount, and are also ready, in future, to give
similar permission to whatever extent necessity may further
demand.

The need for iron ore was not the only motive for the Japanese
Government to take this action. As you are no doubt aware, there
are great iron ore deposits in other parts of the world which
could have been made available to the Nippon Mining Co. Ltd.

Considerable lack of understanding of Japan by the Australian
people was a matter of great regret to the Japanese Government and
people, who were, and are, most anxious to foster cordial
relations between the two nations. Bearing this in mind, and as
the time and opportunity appeared ripe to promote such
relationship the Japanese Government granted the necessary
permission to export the currency in question for foreign
investment, realizing that mutual intercourse in trading could not
fail to bring the two peoples to a more friendly understanding.

As you may be aware, substantial development has been proceeding
at Koolan, and the Operating Company now employs about 80 men, a
figure to be greatly increased in the near future.

Necessary machinery and equipment, which cannot be manufactured in
Australia, have already been purchased in England, and some from
the U.S.A., most of which machinery is now stored at Singapore
awaiting shipment. In addition, a huge quantity of heavy machinery
is to be manufactured in Australia.

In the development of Koolan, I am informed, the West Australian
Government have rendered the Operating Company the fullest
assistance, and have had a survey party in Yampi Sound selecting a
site for a township.

I think it proper to advise you that, in addition to the
expenditure, commitments and contractual liabilities which I have
already referred to, the Nippon Mining Co. Ltd, at the request of
the leaseholders, have paid very substantial sums by way of fees
and expenses to Mr John A. Savage of Duluth, Minn., and his staff
of Engineers visiting Koolan Island to inspect and report on the
Island from an engineer's point of view.

Should an embargo, by way of reduction of output, now be placed on
the Koolan enterprise, the loss would be a huge one-not only to
the leaseholders, but to the Nippon Mining Co. Ltd, which would be
forced to abandon all the costly and elaborate plans they had made
in view of the assurances given to them. The machinery referred to
will be useless to the Nippon Mining Co. Ltd except for the
purpose for which it has been purchased.

At the present time Japan purchases a very considerable portion of
its rapidly increasing meat supply from South America. It is the
intention of the Nippon Mining Co. Ltd (through a sister Company)
to use ships going from Yampi with iron ore for the purpose of
shipping Kimberley cattle to Japan-the distance from South America
being so much greater, the export of Kimberley cattle should prove
beneficial to both Kimberley cattle growers and to the Japanese
people. Iron ore takes up such a small space that there will be
ample room for cattle.

With regard to Dr Woolnough's rcport [3], I have been informed
that, at least in that State, no survey or detailed examination
has been made on which Dr Woolnough's estimate could be based,
and, further, that many large deposits exist in that State in
addition to Koolan.

In view, therefore, of the huge vested interests, and vital issues
involved, it is sincerely hoped that the Commonwealth Government
will make a careful survey of the present position, and will come
to a fair and reasonable decision, to the mutual benefit of both
countries.

TORAO WAKAMATSU