State Guarantees Act, 1954 (Amendment of Schedule) Order, 1959.—Motion of Approval.

Minister for Industry and Commerce (Mr. J. Lynch)

I move:—

That Dáil Éireann approves the following Order in draft:

State Guarantees Act, 1954 (Amendment of Schedule) (No. 2) Order, 1959, a copy of which Order in draft has been laid before the House.

The Draft Order has been laid before the House and its purpose is to guarantee further borrowing by St. Patrick's Copper Mines Ltd., Avoca to the extent of £550,000.

In February, 1958, the Oireachtas approved of an Order made under the State Guarantees Act, 1954, for the purpose of the guaranteeing of the borrowing of an amount of £1,300,000, approximately, by St. Patrick's Copper Mines Ltd. That sum was used by the Company to bring the copper mines at Avoca into production and to repay a loan of £350,000 which had been guaranteed under the Trade Loan (Guarantee) Acts.

The Company has been in production since October, 1958. After a period, difficulties were encountered in connection with the grade of the ore, since it transpired that the copper content was appreciably lower than had been anticipated. The cause of the difficulties was, partly, that low grade material associated with the old workings formed a relatively high proportion of the mineralised rock being processed by the Company. It took longer than anticipated to reach mineralised rock with a copper content as high as that hoped for.

It was necessary for the Company to consider methods of overcoming the difficulties associated with the low copper content of the ore and after careful study of the possible courses of action the Company decided to open up the deposits at Tigroney on the east side of the Avoca river. Exploratory work has been carried out at Tigroney and the Company's proposal is to mine 1,000 tons of ore per day from that area. In addition, the Company's operating methods on the west side of the Avoca river will be altered and mining will be carried out on a selective basis with every effort being made to secure the maximum tonnage of highly mineralised ore to the exclusion of low mineralised material.

At the commencement of its activities, the Company hoped that a substantial revenue would be derived from the sale of pyrites which is a byproduct of the industry. In fact, sales of pyrites have been extremely limited, and the revenue which the Company hoped would accrue, has not materialised. At the present time there are a number of projects under consideration which would provide a market for Avoca pyrites but it is not possible at this stage to give any definite indication as to the prospects of such projects coming to fruition.

With the object of overcoming these difficulties the Company placed before me a proposal which involves a State guarantee of a loan of £550,000. The proceeds of the loan would be used, inter alia, to finance conventional mining at Tigroney and for selective mining on the west side of the Avoca river. The Company have expressed the opinion that assuming the price of copper does not fall below £232 per ton (the price ruling at the date of the application for a State guarantee of the additional loan) the carrying out of the new development work envisaged would enable the Company in due time to discharge its liabilities in respect of State-guaranteed loans.

While the Company may be able to raise and process ore of the quality and quantity estimated, it is recognised that the success of the Avoca mines is closely associated with the price of copper. When the original negotiations with St. Patrick's about commercial development of the Avoca ore deposits were proceeding, the price of copper was £430 per ton. This high price was due to international stockpiling. Since then the price has fallen steadily and was at one time as low as £180 per ton. The price during the last 12 months has varied from a low point of £209 to £267 and the present price is around £247 per ton. It is impossible to forecast the trend of future copper prices but the Company's estimate is that the long term price will be in the region of £240 per ton.

The company which made the loan of £1.3 million to St. Patrick's in 1958 has agreed to lend the additional amount of £550,000 to St. Patrick's. I understand that it is the intention that the new loan will be consolidated with the existing loan, the security for which is a first mortgage on the assets of St. Patrick's Copper Mines Ltd.

The Government's decision to guarantee the additional loan has been taken only after very careful consideration of the present position of the Company. There is a reasonable prospect that the new development work which the Company proposes to undertake will lead to production on an economic basis. Great importance must be attached to the fact that nearly 500 men are employed by the Company and a further fifty will be employed in connection with the new operations at Tigroney. The industry is important to our export trade as its entire production is sold on foreign markets and represents an important item in our industrial exports. There can, however, be no certainty that the project will be a success but in my view the chances of a successful outcome are sufficiently good to justify guaranteeing the additional loan. It cannot be denied that there is an element of risk in so doing but I consider that it is a risk which should be taken.

I recommend to the House that it should approve of the draft Order which is laid before it.

Mr. Sweetman

If ever anything was required to vindicate the decision taken by the previous Government at the instance of Deputy Norton and myself, the Minister has now produced that vindication. At that time we based our arguments on the belief that we had got a price for copper that was higher than what we believed would be ruling over a long period. We were assailed in this House by the present Taoiseach, Deputy Lemass, as he then was, and by Deputy MacEntee, the present Tánaiste, because we had made that bargain. It now appears clear beyond question that the bargain made by the inter-Party Government at that time was a bargain well worth while for this country because it got certain men employed in Avoca who would never have been employed if we had not struck when the iron was hot.

I presume the Minister had to bring the draft of this Order to the Government to get approval for it. I should like to have been a fly on the wall of the Cabinet Room on that occasion to see whether the face of the Taoiseach was as red as it should have been, and whether the face of the Tánaiste, who prophesied that the price of copper would go over £400 a ton in the foreseeable future, was as read as it should have been. I have not gone back to read over those debates to see if the Minister committed himself on that occasion so I will say no more about it.

Mr. J. Lynch

I did not commit myself at all.

Mr. Sweetman

I remember him speaking on it but I shall spare his blushes.

Mr. J. Lynch

I said that I did not commit myself at all.

Mr. Norton

Does the Minister wish to get into the blushing category? The other two old hens got caught out rather badly.

Mr. Sweetman

Every argument put forward by us at that time has been completely vindicated. The Taoiseach and the Tánaiste should come into the House on this occasion and say to the people on this side of the House and to the Irish people generally that they are sorry for the mess they made in the way in which they tried to mislead the Irish people.

Leaving that aside and coming to the proposal now before us, am I to understand from the Minister that Tigroney is on the other side of the river from the works now being carried on? There is a suggestion that in Tigroney the percentage of copper available is greater than where the work is now being carried out. I remember hearing some time ago that Mianraí Teoranta had done their exploration work on the west side of the river in the wrong place, that it was not done in the valley of the mountains where the relatively high-grade copper was but up at the top of the mountain. Is the other work which it is now proposed to undertake being done on the basis of the suggestion at that time that there is better grade ore to be found at the top of the mountain?

I should like also to know whether the Minister has obtained details of any geographical exploration in relation to the mines on the west side of the river and to Tigroney on the east side. If he has, could he give us the comprehensive results of that geographical exploration compared with the place at which mining is being carried on up to this?

I should like the Minister also to tell us what is the amount of copper concentrate exported in volume in 1958 and in this year up to the last time for which the figure is available and what are the values for the respective periods?

Can the Minister also give us any indication of the volume of pyrites that is there? There has been, in other countries, and in the Rio Tinto valley in particular, an obvious problem where pyrites have been allowed to accumulate. It has become a nuisance in the area. Is the Minister satisfied that in this case there is no danger of that and that there will be no danger, by reason of the gases, to each of the valleys concerned?

I do not think that there is any possible thing the House could do or should do other than to grant this money so as to keep up the development. It is money which will be advanced to the company and which will be payable by the company before there is any question of the ordinary shareholder in the company receiving anything. I should like to know what the issue price of the ordinary shares was and what the present price is, both on a market value basis and also on a break up basis.

Mr. Norton

I agree with Deputy Sweetman that the Taoiseach and the Tánaiste ought to be committed to read the brief from which the Minister has just read introducing this motion. As the Deputy said, it should bring a blush of shame to the cheeks of these gentlemen. However, I am not surprised, or indeed disillusioned. I have always regarded the Taoiseach and Tánaiste as two gentlemen extremely skilled in the international game of "chancing your arm". For over 30 years here, I have listened to the most outrageous statements and prophecies being made by these people, only to be falsified by the effluxion of time.

Here is another example of the skilled arm-chancers being confused and confounded by what, in fact, is the position today. Deputy Sweetman and I were endeavouring to have the whole code of mining taxation revised and the whole code of mining laws revised to permit of the development of the copper deposits in Avoca and elsewhere. We had literally screeches from the then Opposition Party, Fianna Fáil, that we were selling out the mine, selling out a very valuable national asset, giving it away for nothing, that we had, in fact, made a soft deal with the Canadian group who were to operate the mine. In fact, we got them to invest, speaking now from recollection, well over £2,000,000—well over 6,000,000 Canadian dollars—in the mine. Nobody else in the world was prepared to invest in the mine, not even people who claimed to be friends of Ireland beyond the seas and who talked about the motherland. We could not get a "bob" out of them for investment in the Avoca mines. The only group in the world prepared to invest in Avoca was the group to which we gave the lease. We got them to invest over £2,000,000 in it. Not only that, but to repay the £500,000 which the State had spent in exploration work there.

The company has run into difficulties because of the change in the price of copper. Of course, the view of Deputy Lemass and Deputy MacEntee, as they then were, was that the price of copper would maintain a lifelong high record, that we would never see copper lower than £300 or £400 per ton. They said that fortified by whatever expert knowledge they had at the time. Of course, the statement was stupid. The Canadians knew perfectly well that copper would not remain at that price. They never financed the project on the assumption that it would remain at that price. What happened was when they came in to negotiate about the mine, copper was. I think, about £240 or £250 per ton. While they were negotiating, copper prices jumped up to nearly £400 per ton. They took a lease of the mine. As far as my recollection goes, I think they said they could make an economic proposition of it so long as the price of copper did not fall to between £220 or £230 per ton. Unfortunately, copper prices slipped back to about £187 per ton, but are now up to £240 or £247 per ton. Therefore, on the assumption that the ore they expected was found there, Avoca should be an economic proposition.

But let me not go away from the first point, that the prophecies of the then Deputy Lemass and the then Deputy MacEntee have been completely falsified by the fact. Copper did not remain at the high level they prophesied. It must be clear now to everybody that the lease granted to the Canadian group to operate Avoca got for this State the best possible price we could get. Will anybody lend this company money today? If we gave away the mine for nothing, there ought to be millions of people willing to lend money to this company, so bright was their future because of the low price at which they got the mine, according to the then Deputy Lemass and the then Deputy MacEntee.

The fact is that nobody will lend them money, not even the insurance company which has apparently come to their aid. It is not willing to lend them money unless the State comes in and gives a State guarantee to the insurance company. Therefore, although we were supposed to have sold them a very valuable deposit at a knock-down price and to have lined the pockets of the Canadian investors with gold, we have now reached the position that nobody in this country, and, so far as I know, in the world, will lend them money to get over their present difficulties. The only source from which the loan can be got is from an insurance company here which is guaranteed that it will not lose one penny because of a State guarantee behind the loan. Surely, in any fair assessment of the situation, it must be obvious that we made the best possible bargain that could have been made in regard to Avoca? That we got a good price and a substantial investment is proved, not only by the Minister's speech here today, but by the speech made by his predecessor when the previous loan was made available to this company.

What I say is not in any sense in derogation of the company itself. I think they have brought into Avoca the latest and best possible mining methods. They brought in methods and processes our people never previously saw, processes and methods, in fact, which are not to be found in many other places in Europe where mining operations take place. As far as the company is concerned, they have done their best to live up to their obligations. So far as my dealings with them were concerned, I found them fair and honourable. They never tried to wriggle in the slightest. They now have run into difficulties, apparently because the quality of the ore is not up to their expectations.

I do not know whether the Minister is prohibited from giving us some information about the content of the ore. The ore, of course, is a lowquality ore, which is mineable and merchantable only because of the present methods of processing. However, as a copper ore, it does not at all compare in lode with what is produced in Chile and Rhodesia. It was believed, with the relatively high prices copper was fetching and the new methods of production of copper concentrates, it would be an economic proposition to mine the minerals at Avoca or to extract the concentrates at a price which would then enable them to be sold at an economic price and thus maintain the industry.

I should like to know from the Minister, if he can tell us without revealing any company secrets, what copper content the company expected to get and what copper content they got. I should like to ascertain also what the selective mining on the west side of the Avoca River means. I think it was stated to us—I am not sure whether it was by the Canadians or by somebody who had extensive mining knowledge—that Mianrai had not, in fact, operated on the best portion of the mineralised area, that they had by-passed a much better mineralised area than the area on which they were operating. Does this selective mining mean that the company will operate in what was believed to be the better mineralised area or what, in fact, does selective mining mean in the context of the Minister's speech?

The Minister said that the exports of this company were valuable from a national point of view. I agree that they are and I should like the Minister to tell us at this stage what the exports of the company have been in three-monthly or six-monthly periods since they went into production.

The final matter for decision here is whether or not we should give this guarantee. A great deal of money has been invested in the enterprise, a very substantial portion of it foreign money, and a fair amount of Irish money will be invested in the enterprise if for any reason the company fold up. Nobody wants a situation of that kind to develop. I still believe that Avoca is well worth thorough investigation and it would be commercial imprudence at this stage to stop the operations there because the going has got a bit tough financially and because of the difficulties in regard to ore which are being experienced. It happens in many enterprises throughout the world and throughout life that difficulties arise from time to time and if they are not faced, the enterprise might collapse but, because people push on doggedly, overcoming difficulties, success which stuns the world is ultimately achieved for the record.

It would be a great pity if anything should happen to suspend activities at Avoca. This drive is now giving employment to 500 people there, whereas, in 1954, it was employing about 40 people, all of whom were under notice. The arrangement was that 12 or 20 of them were to be retained as a maintenance party but the rest were to be dismissed because at that time nobody would put a penny into the mine. It is a substantial change from the position in 1954 when 500 people are now getting well-paid employment in Avoca and to keep them off the labour exchange and to keep them from emigrating is worth a substantial risk so far as the State's finances are concerned.

On balance, notwithstanding the difficulties the company have met with, the State is quite justified in giving this further guarantee. The company on their part have met their obligations without question and their methods of production are, in my view, first-class and that is a view held by many other people who are in a much better position than I am to judge the efficacy of their mining operations. Therefore, it is well worthwhile taking a calculated risk in a matter of this kind and I personally favour giving the guarantee for the company.

Mr. J. Lynch

I do not want to indulge in the scoring of points or to be at the receiving end of points that Deputy Norton and Deputy Sweetman feel they have got home, particularly because I do not want to say anything here that might in any way prejudice the operation that is going on at Avoca. No matter what source any opposition to the leasing of these mines to St. Patrick's Copper Mines came from, or on what it was based, during the period of office of Deputy Norton as Minister for Industry and Commerce, the fact is that to an extent the risks of this operation have come home to roost as far as the Government are concerned.

The extent to which investment was made by the outside body was, as Deputy Sweetman has said, in the neighbourhood of 6 million dollars. I believe it did not quite reach that figure. The State's commitments to date at least match the investment of the outside company, so that constitutes an element of risk as far as the State is concerned and a degree of backing of this enterprise but it must be remembered that it was this Government who had to take whatever risk was involved.

I have not been advised of a new lease so I take it they can operate under the existing lease. In answer to Deputy Sweetman, there is not any problem at the moment about the piling up of the pyrites. The difficulty is finding a market. The uses to which I referred in my opening speech are the possibility of producing sulphur from which fertiliser can be produced. There are other by-products even of pyrites itself which may or may not be useful in the long run.

I am afraid I have not got any information about the price of shares issued by St. Patrick's, but I believe they are quoted on the Toronto Stock Exchange. I might say in that connection that it was not only in regard to any doubt about the success of St. Patrick's operating successfully as a mining company in Ireland but also to the depression which took place in recent months in stock exchanges in Canada generally that the company were faced with financial problems, and even other stocks that would be quite valuable were quoted at somewhat below ordinary prices.

Dáil Éireann debate - Thursday, 10 Dec 1959

State Guarantees Act, 1954 (Amendment of Schedule) Order, 1959.—Motion of Approval.

Dáil Éireann debate -
Thursday, 10 Dec 1959