Newfoundland National Convention, 21 April 1947, Debates on Confederation with Canada


April 21, 1947

Report of the Mining Committee:[1] Committee of the Whole

Mr. Higgins I propose at this time to give you a picture of the territory that these particular acts[2] refer to, and with which the second part of our report deals. As you realise, in the introduction to the railway bill by Mr. Hugessen of Quebec,[3] he gave a picture of that area. With your permission I was going to ask our own senator from Labrador who was in that area, who was over Grand Falls and into the mines, if he would give us an account of the area as he knows it, and any other comments he would care to give us, so we would be in a better position to understand it.
Mr. Burry ....There are one or two comments I would like to make before giving that word picture. With the rest of the Committee, I took a serious view of the change that was made from 10 cents per ton royalty to 5% of the net income. We thought with 10 cents royalty we would certainly get a considerable amount. We found they changed to 5% of net profits, and there are so many suspicions of how big companies have a way of manipulating their profits to avoid taxes. We thought the 5% of the net profits they would declare would not give us much revenue.
Going further into it, I am personally, I do not speak for the Committee, not taking such a gloomy view of what we are going to get out of the operation in Labrador as I was inclined to at the beginning. I believe that this company, with all the money they are going to invest, will be declaring big profits in the interest of the shareholders. and seeing that we are going to get 5% of the profits as a royalty, and 35% income tax — 40% of the profits they declare — I think we are going to get something substantial out of it. That will be cold cash.
There are some people —I have found them in my conversations around the city — who think because we have this great iron deposit and water-power, the revenue accruing will be sufficient perhaps to take care of the running expenses of this country.... If we think in terms like that, we are going to be disappointed....
There is another point we have not touched on very much, the profit that will come to Newfoundland and Labrador as a result of the labour that it will give to our people. We have had figures given to us as to the number who will be employed on that operation, and it is considerable. Ican visualise men and families going from all areas of Newfoundland, and from the coast of Labrador and setting up their future homes, and that will be a tremendous help to Newfoundland.
Some people think, "We are fishermen! How can this country expect fishermen to carry on a mining operation?" To offset that, I would point out that in St. Lawrence we have a mine, and Mr. Poynter told us that when they went there 12 years ago, the men around there were fishermen and knew very little about mining, and now, 12 years hence, they have very fine miners, equal to any in the world.
As far as the people in Labrador are concerned, we have a small population on the coast. These people suffer intensely from lack of funds. This mine is in Labrador. We want to see those people benefit — uproot themselves from the coast and go into the interior of Labrador, and become miners and if anyone is in doubt that the Labradorians are not capable of making good miners, they can get that out of their minds. I have been associated with them for 15 years, and I know they are capable of hard work and of adapting themselves.
When Goose airport started, people from the fishing settlements along the coast came to the airport to work, and helped to build the airport; and the superintendent there told me they brought a great contribution to the airport. The young chap in charge of all the electrical repair work is a Labradorrian, as is the man in charge of the oil-heating apparatus.... The people along the coast will bring a great contribution to the mine, and I hope our government will help these people move from a place where they cannot make a decent living, to a place where they can start again in life. I would not want to take them from the fishery if they could make a living, but they have not been able to do it in the past. It might help the fishery if the men now associated with the industry who cannot make a living were taken where they could make a living, and newer blood brought in for the fishery.
I have lived in that area 15 years, in the same latitude, same temperatures, same summer, same winter, I know the climate and conditions they would have to live under. I think the climate and the conditions under which they would have to live are very conducive to a happy, healthy, comfortable era. When the air base started, men from northern Ontario came to Goose Bay to work, and I visited the base on a good many occasions, and the first question they would ask was, "When are we going to get our winter? You do not have low temperatures. This is nothing compared with northern Ontario. We are certain you must have more severe winter." They found out for themselves that conditions are not more severe than the northern part of Ontario. What is true of Goose Bay is true where the Labrador Mining and Exploration Company is going to operate this iron ore deposit.
I have never missed an opportunity oftrying to point out the atmospheric conditions and living conditions, and how they are not to be looked upon as adverse; people moving into the area will find a good climate, and will be able to grow their own vegetables and live under similar conditions to northern Newfoundland and northern Canada....
I think it is important that Newfoundlanders and Labradorians should take advantage of this mining operation, and anything the government can do to get our people, who are not making a comfortable living, to move in there, will add to what Newfoundland is going to get out of it. As 510 NATIONAL CONVENTION April 1947 well as getting cold cash, one of the greatest advantages is the employment it will provide and the revenues that will come; various expenditures will be made in Newfoundland territory, and the taxes will come to the government....
Mr. Penney Will the Labrador Mining and Exploration Company agreement be open for discussion at this time?
Mr. Higgins What I propose is to have the Quebec act[1] read and explained, and then compare that act with our act. It is better to reserve comment until we give you full information.
[The Quebec act was read by the Assistant Secretary]
Mr. Higgins Mr. Secretary, we will stop at that point. I would like you to refer to the sections which we have read. You will be able to follow our comments easier. Get the 1938 act, and the 1944 act, and I will give you the cements, and you can check them yourselves.... You will note from paragraph 1 of the Quebec act the Hollinger North Shore Co. has 3,900 square miles altogether. The Hollinger North Shore is a company similar in personnel to the Labrador Exploration Co. Our concession area is 28,000 square miles. Paragraph 2 provides that they have rights, in that 3,900 miles, from the date of issue until 1952, with arenewal period of two consecutive periods of five years each, making something roughly like 16 years of a free concession area. it is not free, because, as you will note from paragraph 3 of that act, during all that time they must pay, beginning with $10,000 at the date of issue of the concessions, and $6,000 each year during the period of the concession. Now this area began in 1936 for 20,000 square miles, and continues up to 1953, and there is no payment of any kind during that time. The only obligation of the company is to do work up to $50,000 per year during that time. Now both acts provide that the company must pay the cost of survey, boundaries, etc., in other words thoroughly prospecting and surveying the area, and in both acts they have to supply the governments, both ours and the Quebec government, with all information.
In Newfoundland the company and its predecessors have control of 20,000 square miles from 1936 until 1953. They are paying $50,000 per year, at least they are spending $50,000 per year for work, but that is the only amount that they are obligated to spend. Now I say, on the basis of the land they got from Quebec and on the basis of the land they got from Newfoundland, we should have been paid, at the date of the issue of the concession, the sum of $50,000, because, as you will note, the area is roughly five times as great as the area of the Quebec concession. Ours is 20,000 miles, theirs is 3,900 miles. For each year they had this concession they should have paid us $50,000. Now they get, after a period, a regular mining license. It is true, and I must point out to you in all fairness, that after 1952 the company will get the area that they require up to 2,000 square miles, and at that time they are obligated to pay 5 cents per acre for 2,000 square miles.... My memory of the act is that they have the privilege of acquiring 2,000 square miles for a ten year licence. At any time within that ten years they have the privilege of picking 1,000 square miles from the 2,000 square miles, and for the 1,000 square miles they pick they are entitled to get a 40 year further additional period of time for 5 cents per acre. In other words ifthey so wish they could tie up for 50 years 1,000 square miles of Labrador, which I presume would be the best Labrador ore section, for 5 cents per acre, for 50 years. Now they would have to pay for that $64,000 per year if they took the whole 1,000 square miles. At the end of that time, or at any time during it, they have the right to apply for a mine lease. If they take out a mine lease they have the right for 90 years to export and exploit the mine in Labrador on the concession area. For that 1,000 square miles they pay a royalty, or a rental rather, of 50 cents per acre, so that if they took up the full area of the concession, they would have payed $320,000 per year in the way of rental.
If they operate it and, under the act, have to pay a royalty to the government, they could deduct the amount of royalty that they would have to pay from that $320,000, if the royalty was not greater than the rental. in other words, if the royalty did not amount to $320,000 they could deduct whatever amount they had to pay from the $320,000. If the royalty amounted to $320,000 or more no rental had to be paid by them. Is that clear?
Mr. Smallwood That's to encourage them to operate.
Mr. Higgins [don't know — that's the act. Now April 1947 NATIONAL CONVENTION 511 paragraph 5 of that Quebec act provides that before the first of May in each year all such reports (that is of their work) must be given to the minister, as well as a certified account by the auditors of the amounts actually spent. Paragraph 6 provides that the company must in the calender year 1946 spend $25,000, and during the calender years 1947 — 1951, $39,000
Mr. Smallwood How does that Compare?
Mr. Higgins That compares with our $50,000 for 20,000 square miles. Paragraph 7 provides that the company can only acquire 300 square miles. In Newfoundland they can get up to 1,000 square miles. You will note in paragraph 7 of that act it says definitely that they are definitely obliged to mine on or before January 1, 1958, and if they don't mine on or before January 1, 1958, their licence to mine may be cancelled at the option of the government, and that proviso also applies if they fail to comply with putting in their claim. We have no such proviso. The country could be tied up for 50 years for $64,000 a year, and a mining license or lease could be acquired up to 8 square miles. Paragraph 10 provides that they have the right, during the period of ten years from the coming into force of the Quebec act to have a strip of land 10 miles in width contiguous to the area reserved for them. That is really one thing that they don't have to pay anything for.... Paragraph 11 gives the right for the period of 60 years for the concession. As I said before, our act provides that they may have a non-mining licence period at 5 cents per acre for 50 years, and a lease period for 90 years. They have 60 years. We gave them, for 5 cents an acre 50 years, and 90 years at 50 cents an acre.
Sub-paragraph C of paragraph 1 l: "The Company shall pay to the Government of the Province ... $100,000." That is altogether apart from any rental or anything else, but, as I must point out to you again, if the company operating in Newfoundland-Labrador acquires the whole area under a mining lease they are obligated to pay $320,000. If they don't make $320,000 per year by the way of net profit, or at least royalty on net profit, whatever they make they can deduct from that $320,000. And they are not obligated to take that amount. They can take any part of it, or tie the whole thing up for 50 years.
Paragraph 12 provides that if there is an interruption in the shipments of ore in Quebec, if they don't ship for two years, they may have their licence cancelled. That's another little thought. Paragraph 14 provides for payment out of the annual profit resulting from the area.... I want to make a few comments then on the thoughts which are shown in that act....
[Mr. Higgins continued to compare in detail the Quebec and Newfoundland legislation, focusing on deductions allowable from gross profits before the calculation of royalty]
Mr. Chairman I would like to point out that this is an act of some 24 pages, drawn up presumably by lawyers, meant to cover the legal rights and immunities anticipated by the company or necessary in their operations, and that we. as a Convention of this character, cannot possibly go through all the details of legal interpretation in' the course of an aftemoon's debate. If we are going to go into it in that fashion I will have to suggest that we adjourn this debate and study it a little more.
Mr. Job I agree with you. I think we are wasting a lot of time.
Mr. Chairman I think so.
Mr. Higgins All right, but you will note that there are several deductions that we have in our act that do not apply at all to Quebec. I will draw your attention to these....
In other words our corporation tax on that company is deducted from the royalty. In the Quebec act it is not deducted.
Mr. Smallwood Paid to any local authority, municipal council is it?
Mr. Higgins Well, if they had a council down there as well.
Mr. Smallwood Oh, yes.
Mr. Higgins You have a list of duty deductions in that act. I have to point out that with respect to customs duties that may not be such an important detail in Quebec, as most of the articles they use would be Canadian manufacture, but there would probably be some articles that they could not get in Canada and would have to import. If they pay any duty here it is deducted.
Mr. Chairman Looks like the royalty will be based on net profits as well.
Mr. Higgins Definitely, and it looks like net profits will not be very great. Before you go into the discussion of the matter we can give you further details from our minutes. and the act is open now for your discussion at this point if you so wish, and I will answer any questions I can on 512 NATIONAL CONVENTION April 1947 it.
Mr. Butt I was wondering if we need go so far in discussing this matter, if we could not get the basic principles to tie in closely with our terms of reference. As I see it, some years ago we had some territory on the Labrador which was, at that time, worthless. As the world market developed we began to realise that we had some potential wealth; later, as the market developed further, that there was a possibility there of real wealth. Now, if we had had the experience, and financial resources, and the political climate, it is just possible that we might have been able to take our potential wealth and develop it solely for our own benefit, and the profit would stay entirely in Newfoundland; but we have neither the experience, the financial resources, nor the political climate, that is the whole thing. Therefore we say to outside capital, "You have found this potential wealth, if you will come in and spend a couple of hundred million dollars, dig out the hole and turn it into real wealth, the people of this country will get value in the form of wages, the government of this country will take from the company a certain percentage of its profits, which in this case turns out to be 40%." I am certainly not a competent person to discuss matters arising out of this law. For example, I have the temerity to question the principle of royalties altogether, but who am I? It seems to me that we can't expect to get any more than we are getting, and for our purpose it ought to be enough for us to know that we are going to get real wealth in the form of wages, and that we are going to get from the company a definite percentage of its profits. But we can add something to this, because shares are sold to Newfoundlanders, so that we can share further in the profits which this company may make.
The main thing from my point of view is that the Labrador mine is going to be developed. In   the long run it does not make any difference to me whether you tax the companies coming in to do business or not. The main thing is that the hole is there in the ground. We say, "Come and get it out. Pay our people good wages, and give us a fair share of the profit, which may average over, or about 50-50." It seems to me as simple as that, and that we ought not to go probing too far into the technical details....
Mr. Penney I would like to say something about the agreement as it affects the future of Newfoundland. I would not attempt to go through the maze of documents in connection with this mining matter. It would take a Philadelphia lawyer to unravel it all. I would like again to take up this agreement in the hope that something may be done to change it before it is forever too late. In doing so, may I ask you to pierce through the maze of expert legal phraseology and see in this amazing document two of the factors that will materially affect the economy of Newfoundland and its people for all time. No doubt there are other important factors hiding behind the profuse array of facts and figures, but that I prefer to leave to the good judgement and discernment of the other delegates.
Two key factors I wish to stress now are the Grand Falls[1] water-power potential, and the 5% royalty on net profits. The former is, to my mind, tied up literally for a song. The other is a joke if it were not so tremendously important; for 5% net profits, as you all know, can be smothered out so completely as to leave Newfoundland with nothing for its mineral excepting labour.... Apparently that iron ore should be figured in cents for promoters rather than in dollars for poor old Newfoundland, and in regard to this I say that clause in the agreement should be changed to provide a straight royalty of so much per ton for the ore exported.
In regard to that key asset in the great Grand Falls water potential, you will have noticed in the correspondence between one of the wealthy promoters and our Newfoundland representative, that there is prospective water-power available in Quebec that could be used instead of the Grand Falls water-power, which in itself, to put it mildly, is a subtle argument, yet so plain that I am sure delegates will not fail to take note; for if that is so, we may be quite sure that it cannot be obtained at a give-away price, for Mr. Duplessis and his associates in Quebec will see to that, and I may add Labrador also, if it can be gotten so cheap and easy.
I hope I have said enough to impress you with the urgency of impressing upon our present trustees the necessity of having this agreement changed, so that Newfoundland and its people shall obtain at least a fair return from its vast mineral deposits in Labrador before it is forever April 1947 NATIONAL CONVENTION 513 too late. Let us then, all together, send out a warning from this assembly that will reverberate through Newfoundland and Labrador against this agreement, for it seems to me to be cloaked in sheep's clothing, yet it is in reality a wolf....
Mr. Smallwood When it was brought out by the Mining Committee that a very important change had been made in the taxation that Newfoundland would get out of this mining company, a change from the 1938 act of 10 cents a ton on every ton of ore that company has exported from Labrador, to the 1944 act, which cut out the 10 cents a ton and puts in its place 5% of the profits, I must admit that I shared the feeling Mr. Penney has just expressed. I too was disgusted with it, and I so expressed myself on Friday last. Since then I have been reading the 1938 act and the 1944 act and also the Quebec act, and whatever other information I could get, and today I say frankly, though I may be mistaken, I am not nearly as disturbed as l was two or three days ago.
We know, the Mining Committee tells us, that the great and wealthy iron mine of Lake Superior, the Mesabi Run I think it is called,[1] is coming to its end; another seven or eight or ten years, just about the time it will take to get this Labrador mine going, is about how long this great iron mine will still last in the United States. Now, to the steel mills of the United States, that is a very serious situation, Along comes this Timmins out-   fit of Canada. Some years ago they got the right to explore Labrador — 20,000 miles of it — and to stake out 1,000 miles of it some day to develop the iron ore. That was some years ago. We had the 1938 act and the 1944 act, but along comes Quebec, just this year, was it not?
Mr. Higgins Last year, but they were in there since 1942.
Mr. Smallwood Yes, but it's only last year they passed this act. We are told there are two mines, one on the Newfoundland side of the boundary, and the other on the Canadian side, but to all intents and purposes it is one mine, separated by a purely artificial, though legal boundary, and they have not even found out yet where it lies. They claim that they have got to develop on both sides of the boundary to make it profitable, and to do that they have got to spend one quarter of a billion dollars, of which about half would be spent in Newfoundland-Labrador and the other half in Quebec-Labrador — New Quebec I believe they call it.
They say Mr. Timmins is a very wealthy man, and that the men he has associated with him are very wealthy men also, but nobody supposes for one single minute that Mr. Timmins and his friends are going to find out of their own pockets one quarter of a billion dollars to develop this great iron mine, which means that they have got to sell shares on the money markets. No doubt here in Newfoundland there will be hundreds of people buying shares in that great corporation. In Canada and the United States there will be thousands. It will be a great corporation with possibly tens of thousands of shareholders. Would any of us, assuming that we had money, buy those shares if we were not completely satisfied that they were a good buy, that we were going to make a profit, and that we were going to get dividends? So that to sell shares they have got to prove that the ore is there, second that it is in sufficient quantities, third in sufficient quality, and fourth that after putting in quarter of a billion dollars, that they will be able to run that mine at a sufficient profit — not the 1% to which Mr. Hickman referred on Friday; but ... around $10 million a year since they have to sell the shares, and that they cannot do unless they can show the public that there is a good chance of making a profit.
Now the next question is whether there is a way in which they can hide that profit in such a way that when the Newfoundland government gets 5% of the net profit, that that 5% won't give them any money. Can they hide it in such a way that when the tax assessor starts to collect income tax, their profits will be so hidden that he cannot collect income tax from them? Well, maybe so. It would not be the first time it was done, but on that point we have this reassuring fact, that part of the company will be operating in Quebec, and the Government of Quebec ... is well used to dealing with great corporations. Not only that, but you have the probability of the federal government of Canada itself needing to know what profits that corporation makes. All right. Cannot the Government of Newfoundland, whether it be the present Commission, or responsible government, or confederation, could not Major Cashin for example, if he were Minister of 514 NATIONAL CONVENTION April 1947 Finance, from the knowledge he could get from the Government of Quebec and the Dominion of Canada, easily find out ... what profits that company is making? Have they not got to declare dividends? Won't the shareholders demand dividends? I am doubtful if they can hide them. I imagine Major Cashin would be the first to tell me that these shares will be quoted on the stock exchange, and will be as familiar to the investing public as United States Steel or any other great corporation The full spotlight of publicity will be playing on that company, because there will be maybe tens of thousands, or maybe hundreds of thousands of shareholders wanting to know what profits they are making. Well, if everyone knows it, surely the Government of Newfoundland will know what profits they are making....
There is one thing that gives me worry. It has not come up today or at any time. Is there any guarantee that this town of 35,000 souls will be on Newfoundland soil? Two mines will be worked together, it is all one mine. If you can work those two mines as one mine, then certainly you can have the town on the Quebec side as easily as on the Newfoundland side. Apart from the 15 cents per horsepower royalty, if we can get the town in Newfoundland and not in Canada, and could increase the royalty per horsepower above 15 cents, then it seems to me it would be a very fine deal for Newfoundland.
Somebody said here that I was trying for the sake of confederation to make out that Newfoundland did not have a good future. In reply I will say this, that on account of a number of things — the fact that this man Timmins is associated with Hanna —l I have heard of him, he made and unmade presidents in the United States — you have these two very big men — for that reason and for the reason that the iron mines of the United States are running out, and for the reason it is going to take one quarter of a billion dollars to develop, I am convinced that this mine in Labrador is one of the biggest things that ever struck this country — utterly monumental. There is another thing about it. It is a local company, a Newfoundland company, registered in Newfoundland subject to the laws of Newfoundland. They are going to tie up in Newfoundland $125 million. That $125 million will not be here in bonds, shares, cash or bank notes. They cannot slip it across the border. That $125 million will be down there in the form of a railway, a town of 35,000 (almost as big as St. John's), many buildings and mining machinery — a property making four or five of Bell Island. is not that some security to Newfoundland? Some security to the Government of Newfoundland? We have them by the short hair if they tie up $125 million in our territory. I do not see how they can crawl out without paying the taxes.
There is another side to it. I was wondering whether we could get back the water-powers. Suppose you had an elected parliament, whether under confederation or on our own, that House of Assembly is sovereign and supreme; suppose this country was not satisfied with the Bowater contract, or if you like AND, or Bell island or Buchans; suppose they felt the government was not getting enough taxes out of those corporations; am I far wrong when I say what parliament makes it can unmake? What it does today it can undo tomorrow? Its law is supreme when it writes it, and passes it in the regular way. it could, if it liked, nationalise Bowaters tomorrow, buy them out and make them a government proposition in the same way that the government of England is taking over the mines in England.
Mr. Higgins With this exception. I would say. It is true what parliament makes it can unmake, but we must regard this as a binding agreement. If we did what you suggest, it would be extraordinary if people would do business with us again.
Mr. Smallwood I am talking of the ability of parliament to do it. Naturally they would have to consider the consequences that would follow from its action. If it is true of Bowaters, AND, Buchans, St. Lawrence and Bell island, is it not also true of Labrador? Would not that company in Labrador have that hanging over their heads — especially if I have anything to do with the future government of Newfoundland — a warning to be on their best behaviour, with the possibility that Newfoundland might step in? They may have more reason to be scared than you are willing to admit. I am fed up with the way this country has handled those foreign corporations.
What this Convention has to decide is this: what are the chances of Newfoundland people having a decent living? What are the chances of the Government of Newfoundland balancing its budget? As far as this report is concemed we have April 1947 NATIONAL CONVENTION 515 to consider it in the light of these things. Regardless of our desire to knock the Commission of Government, what we have to decide is what bearing will this Mining and Exploration Company have on the future ability of this country, its people and its government, to be self-supporting?
Personally, I am quite satisfied. I have my doubts about the fishery, doubts about other activities. But so far as Labrador is concerned, I say cheerfully and willingly that this, as Major Cashin says, is the biggest long-range thing that has come to this country: so big that we get lost in the details of these acts. Let us not get lost in the details. If this company will provide a town of 35,000, its wages will provide the future government of Newfoundland with an amount of maybe 1.5 million a year.
Mr. Higgins Before we go any further on the matter, I would like to draw your attention to the memorandum which was prepared by Mr. Eric Cook. As a result of a meeting which we had, it was suggested that we ask Mr. Cook to prepare a memorandum of the situation as he saw it. Mr. Cook is solicitor for the Labrador Mining and Exploration Company.
[The memorandum was read[1]]
Mr. Higgins That figure of $125 million Mr. Cook assures me, will be for the railway and the mine in Newfoundland. He is satisfied that is the figure that will be spent in Newfoundland alone.
With respect to the income tax, you have before you the Income Tax Consolidation Act, 1944. When Mr. Allen was before the Committee, we asked what the position would be if the Labrador Mining and Exploration Company was controlled by a parent company, which was a steel company, and they were selling ore to the steel company at a price lower than the regular price. Mr. Allen's answer was that if returns came in with the price of ore marked $4 a ton and the real price was $6. he might not know it, but he would send it to Mr. Claude Howse, who would give him the proper price. Mr. Howse says they get weekly prices. He says if the ore market was artifically depressed, if all the big companies got together and depressed prices, nothing could be done about it; not only Newfoundland, but no other authority could do anything about it. There would be no reason for them to pay taxes outside Newfoundland rather than pay Newfoundland, because Newfoundland taxes are less than Canadian corporation taxes.... His point was there would be no reason for the companies to diddle the returns; they would have to pay bigger profit or income tax outside Newfoundland than inside. He has the right, if they put in returns he considers not fair, when dealing with an interlocking company, to go into the matter and determine what the fair amount is. Our paragraph commenting on the suggestion there might be depreciation value is not critically correct from the explanation we have now. I believe most of us are satisfied, we have to admit that now....
Mr. Fudge I am not going to say much in can nectin with the Mining Report because I do not know too much about acts.... As far as I am concerned, I think we have gotten a raw deal.
Mr. Miller I am open to convincing on the Labrador deal. I would like to make certain it is not a raw deal. I rather resent the approach made to this matter by some speakers. Some people went so far as to say that it was not our business whether we got a good deal or a bad deal. Now that's wild. Newfoundland's present position is probably entirely due to the fact that in the past we did not get deals that were so good. We now come to a stage today where we made comparisons, and we have worked a lot on this and we are still open to conviction. Some speakers do not want to hear it. Why? They argue that it is not in our economic interest. Can you convince me that if we get 15 cents per horsepower it is as good as $1 per horsepower? We might have one million horsepower. I can't see why we refuse to agree or disagree after we consider it, but you actually refuse to consider the information that we humbly place at your disposal. It is immaterial to me, but we put it to you as fairly and plainly as possible. I would prefer not to deal with it here, and I still think it can be dealt with better out of here, but I am open to conviction and I hope there are many others too. We have been a long time on this Mining Report and a lot of people wondered what we were doing. Some people said we were not doing very much, and sometimes I felt the same, because we could not get all we wanted and if at the last minute something shows up and we have not formed an opinion on it we waive the right to go thoroughly into it, but that 516 NATIONAL CONVENTION April 1947 right is not altogether free here this afternoon and that I resent.
In our Mining Committee investigations, we picked up material everywhere. Some of it was authentic, and some was fairy tales. Some that was given as authentic by responsible authorities, was retracted as late as 12 o'clock today. Can we, in view of all this, make up our minds and be straight about it? We looked back to the year books and other books to find the history of the iron ore industry and the steel industry, which we know nothing about in this country. We know plenty about the iron ore industry and the niggardly manner in which it has been developed here, and we find that iron ore mines never pay. One man said, "We lost 30 cents a ton last year due to a low dollar rate and 30 cents a ton because we wrote a contract and the sterling exchange failed." 60 cents a ton on their ore production, and they go right on operating! They don't hesitate. What is the answer? The answer is that they feed the raw material to the company away, and the steel company makes a profit. That is a mean position for Newfoundland to be in. If it can be avoided in a second instance, it is well worth consideration for a few minutes today. I don't want to force you into it, but I do point out that such is the position, and we may have a repetition of it again. True, there is everything in the act to protect us in the net profits and more in the income tax act, but that company has a right to sell out to a steel company. and after that our trouble begins.
We had a question of 10 cents per ton, which came up before the government some years ago and was written into the original agreement. The company argued that they could not operate if they had to pay 10 cents a ton, but among the information that we presented to you on page 16, there is a little tabulation of figures... Let's not forget that this Labrador Mining and Exploration Co. could not pay us 10 cents a ton, and let's compare their operations with present prices in the Michigan area. We find there is one operation, taxes paid the government, 24 cents per ton. That's the Gogebic, it's underground mining and we believe the ore content would be about the same percentage. You have taxes of 24 cents per ton. You have 33.5 cents per ton royalty.... In the town you have federal income and excess profits to the extent of 15 cents a ton. If you add all these up you will find that that mine pays out as royalty, as these figures add up, 69 cents per ton.... We find that the Michigan operation pays 69 cents per ton, and the company coming in here is flabbergasted at the idea of paying 10 cents a ton. Has anyone got the answer to that? Give me the answer to that, and I will sit down quite contentedly. But the information came at a late date on a lot of these items, and we have not been able to cover it thoroughly or give you our definite opinion, consequently we have the right of opinion, and we hold that right, and present die record to you in that same manner.
Mr. Hollett I don't intend to say much on this. but I am entirely in agreement with Mr. Miller. I am thoroughly convinced that Newfoundland as a country has got a raw deal in this 1944 act, and I can't understand any man trying to praise it and saying we got the best act in the world.
Mr. Smallwood Who said that?
Mr. Hollett I don't know. You might not have been here. The 1938 act does not look so bad. There were some chances for the treasury to obtain some income from it, and after all that's the only direct value to the treasury — the royalties and the income tax which can be obtained from the operations. Under this 1944 act, if you run through it carefully, you will find that by the time the company has taken out all the things which they may take out, it is practically impossible for them to make any profit whatever, and they will be like the mine in the Michigan area. They have been operating at a considerable loss but still are in operation, and I am quite sure that all these mines are under the contract of certain steel manufacturing companies. I am not convinced yet that this company in Labrador is not working in conjunction with steel manufacturers, because I can't understand anyone spending $125 million without having made some provision for the sale of their ore, and I think the steel companies are in league with them on this deal. It is pointed out that we will have a lot of men down there in that visionary town. I fail to see where, in this country, they are going to get many miners. We have some in Bell Island and some in Buchans, but no others. If we put them in Labrador you have to deplete the manpower of these other places, and you can't expect the men to leave Bell Island or Buchans to go down to the Labrador wilderness, so where is the manpower April 1947 NATIONAL CONVENTION 517 coming from? Certainly not from Newfoundland in any numbers, so where will we get any revenue from the work that will be supplied there? Under the old act we would get 10 cents per ton, and I have yet to see who could advise that that 10 cents per ton be taken off.... Can anybody here tell me how iron ore mines in Michigan in 1944, when the war was at its height, how these mines could operate at a loss and continue operating?
Mr. Smallwood The same as our fish merchants do. They always operate at a loss.
Mr. Hollett Where do they get the capital?
Mr. Smallwood They had a lot when they started.
Mr. Hollett Yes, I know all about that. I know a good many fish merchants who had nothing when they started and have a lot now. I would like to remind some of my friends here that in Quebec the royalty paid is per horsepower.
Mr. Higgins Installed horsepower.
Mr. Hollett Yes, $1 per horsepower in Quebec, and why in Newfoundland should we say that 15 cents is a very good figure? I can't understand it. Application has been made for the export of water-power, and I am of the opinion that the country, or the government, should not, or rather that before any such license is granted, the whole matter of royalties, both on ore and on waterpower should be again raised. I would almost be prepared to make a motion to this effect. I can see that the revenue of this country cannot be enhanced in the next 25 years, either by income, royalties or labour, through the 1944 act.
Mr. Newell ....We are a country with certain minerals, and we require employment for a certain number of men, and we think that's a desirable end. On the other hand there is a company which has capital which it wishes to invest, solely that it may make profits. The two meet and do a bit of bargaining. The country is not concerned about the interests of the company, and neither is the company concerned about the country. They are both out to make the hardest bargain. It looks to me as if we have been driven the hardest bargain...
[The committee rose and reported progress and the Convention adjourned]


Newfoundland. The Newfoundland National Convention, 1946-1948 Vol 1: Debates. Edited by J.K. Hiller and M.F. Harrington Montreal: Memorial University of Newfoundland by McGill-Queen's University Press, 1995).



Selection of input documents and completion of metadata: Gordon Lyall.

Notes de bas de page:

  • [1] Volume II:313. [Volume II is not in The Confederation Debates Collection]
  • [2] Refers to: An Act for the Confirmation of an Agreement Between the Government and Labrador Mining and Exploration Company, Limited, 2 Geo. VI c40 (1938). An Act further to Amend the Act No. 41 of 1938 Between the Government and Labrador Mining and Exploration Company, Ltd, 8 Geo. VI c47 (1944).
  • [3] An Act to Incorporate Quebec North Shore and Labrador Railway Company. 11 Geo. VI c80 (1947).
  • [1] An Act to Promote Mining and Industrial Development Within New Quebec, 10 Geo. VI c42, 1946.
  • [1] Now Churchill Falls.
  • [1] Mesabi Range in Minnesota, USA.
  • [1] Volume II:361. [Volume II is not in The Confederation Debates Collection]

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