I move:—
That Seanad 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.
State Guarantees Act, 1954 (Amendment of Schedule) (No. 2) Order, 1959: Motion of Approval.
The purpose of this draft Order, which has been laid on the Table of the House, is to guarantee further borrowing to the extent of £550,000 by St. Patrick's Copper Mines Ltd., Avoca.
In February, 1958, the Oireachtas approved an Order made under the State Guarantees Act, 1954, for the purpose of guaranteeing 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 that had been guaranteed under the Trade Loans (Guarantee) Acts.
This 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. As a result 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 deposits at Tigroney on the east side of the Avoca river. Exploratory work has been carried out at Tigroney and the company propose 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 by-product 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 past 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 50 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.
The statement by the Minister now shows up the nonsensical attitude taken by the Party then in Opposition to this proposal when it originally came before the Dáil. If one wanted to make statements now similar to the speeches then made, one might say that not only are the Government giving away copper but paying people for taking it away as well. One might make that sort of statement about it and speak at considerable length but I do not want to do so. I want to ask the Minister a question. I appreciate that the last guarantee was implemented in the sense that it was a guarantee. Has any payment been made under the last guarantee? Has any sum of money been paid to any person or corporation who made a loan to St. Patrick's copper mines?
I gathered from the way the Minister spoke that there was in fact a payment, but I could not be quite sure. As far as I was concerned the phrase was not clear. That is the only point I want to raise about it but I think it does show that to safeguard the employment of 500 people, we are spending a good deal of money. If the price of copper did change, it would safeguard their employment through time and it might be worth while and that, of course, is the risk to which the Minister referred at the end of his statement. But if there has been no payment made up to the present under the existing guarantee for £1.3 million—this will increase it to approximately £2,000,000 —there is a contingent liability, and, assuming that the moneys were borrowed by St. Patrick's Copper Mines in Canada, a contingent external liability. I should be grateful if the Minister would address himself to that point when he is replying.
From the beginning, I opposed the whole principle upon which this company was set up to exploit these mines, and upon which the mines were handed over on lease to a Canadian concern. If it were not tragic, I think it would be funny to say that now we are being asked a second time to lend money to these people in order that they may at some further distant date be able to pay us back the money we lent them. We are now being asked to lend another £550,000, making a total of over £1,000,000 and the security being given to us for this loan is the mines which we originally leased to the company.
In fact, then, we lease our property to a company, we lend them the money to start working the property, and they say they cannot do it on the money we first gave them, and that they are afraid they cannot pay back that money unless we lend them more. We say: "That is all right; we shall lend you some more money, in order that you may be able to pay back the first loan." When we have done that to the tune of over £500,000 the first time, they say to us: "We still cannot pay you back, and we still have not been successful", even with all the Canadian know-how about which there was so much talk. To that we say: "On the security of what we first leased to you, we shall lend you another £550,000 or we shall guarantee a loan for such an amount."
I am not an expert in high finance; I am not a supporter of the private enterprise capitalist system of finance and administration; but I think in fairness to such a system that this type of proposition is not a representative example of the efficient way to operate it. I felt at the beginning, and I feel now, that we should have had the courage to allow the people who did the dangerous, risk-bearing work of prospecting, Mianraí Teoranta, to do the development also, and to do it at a slow and steady rate which would suit the needs of this country, basing their development, not upon the necessity to satisfy world markets immediately but the determination to satisfy our home demand for copper; then to proceed slowly, as they have done in similar concerns in other small countries—in Finland, in relation to other metal ores—in order to our own needs, rather than rapidly to assuage the greeds of foreign investors. But we were told then: "This is not the way to do it." I remember one Senator telling us in effect: "After all, we should be very pleased to get Canadians to come over here and risk Canadian money because, if we were to develop it ourselves it would be Irish money that would be lost if it went wrong. We have persuaded these guileless Canadians to come here and risk their money and you are being very ungrateful about it." How grateful should we look now, that we have leased the whole enterprise to foreign controllers, lent them the money to develop it, and now propose to lend them more money to pay us back? I do not think it makes us look either intelligent or efficient, and I do not think it can any longer be held that it is mainly Canadian money which is being risked.
The Minister mentioned that the copper content in the ore, in the aggregates, turned out to be lower than was anticipated originally. I understand from his statement that this applies chiefly, as it were, to the primary workings. I should like him to quote a percentage figure there. It is a very low percentage—it was one-point-something that was given to us first for the extraction of copper —and I should like to ask what is this lower copper extract figure now, in terms of a percentage?
In my opinion the big original mistake here is indicated by the Minister's words when he says the "entire production" of these mines is sold "in foreign markets." I think that illustrates the entirely faulty emphasis we have placed on this from the beginning. The necessity to sell fast in world markets has, in fact, been a major factor in producing this type of crisis. We have not been producing in relation to our needs in Ireland but in relation to a market price which fluctuates very considerably, which has at times dropped considerably lower than it is now, but which is nothing like what it was before.
I admit that if we had developed these mines ourselves we would also be affected by world prices, but the pace of our development would have been geared to suit our own country and we should not now be so much at the mercy of world price fluctuations.
Even if they are successful in extracting a higher rate, and in the long term I am not pessimistic about that, the results will be that foreign enterprise will squeeze the mines dry, sell the product as fast as it can abroad, and we shall be left with worked-out mines.
When the Government had the opportunity of making a choice, between private development, with all that that usually implies of risk-taking, risk-bearing, initiative and so on, and public development, with the community bearing the brunt of possible loss but also publicly deriving the benefit of possible profits, it seems to me they decided they would have not quite one and not quite the other— they would not have an altogether private enterprise scheme nor an altogether public enterprise system— and the compromise they made was to say in effect: "If this enterprise makes a profit, it must be kept very strictly in private hands, but if it turns out to be a dead loss the community will have the honour of footing the bill."
Both Governments, and it is both, because the other Government were responsible for insisting that the mines be developed on these terms, by their timidity have now put themselves in this ridiculous position in which they find that they are successfully getting the worst of both worlds. So far, the mines have not made a profit, but, so far from any loss being borne by the private and foreign interests, the Government are asking us under this Order to assume the honour of underwriting the loss.
I think it is evident that within the terms of free enterprise in the capitalist world this company has been unable to find the money privately, as an economic proposition, and I should like to hear the Minister's comment on that fact. They have not been able to float a loan in Canada or in Ireland among private investors, except with a cast-iron State guarantee of a further £500,000. That indicates in the terms of the private enterprise system that the scheme is not capable of being privately underwritten, is not regarded in investors' minds as a good, sound, economic proposition, and it is into such a proposition that the Minister is here today asking this House to be prepared to pour another £500,000 of taxpayers' money.
Having decided then that we are to get the worst of both worlds—if there is a profit we must not get it, and if there is a loss we insist on recouping it —I should like to ask the Minister what happens in a year's time if the company comes back again and says: "In order to pay you back, or pay the interest on what has already been lent to us, we should like you to lend us another £500,000"? Would the Minister give us some indication of what will be the limit? Is the sky the limit? Have both our Governments let themselves become so far involved and committed that we shall be bound to keep pouring money down the mine? Is there any limit?
Supposing for the sake of argument, even at the risk of losing a certain amount of political prestige, the Government are forced to the view that there is a limit, that this in fact is the limit, what happens to the company then? Does it go bankrupt? I should like the Minister to tell us what might happen if this loan were to be refused. He has not told us what the alternative was, and I should like him to dwell on that in his reply. What would have happened if he had said: "No", or if this House and the other House said: "No, we are sorry. We are so short of money that we feel we cannot now legitimately underwrite this further loan?"
I suggest that the company would have to go bankrupt; it would have to cut its losses and we should have to cut ours. I would also suggest that then we would have the opportunity of doing what we should have done in the first place, by developing this whole enterprise at a slower pace, one that suits our country, and not necessarily the world merchants and financiers and the quick profiteers tempted by high prices of copper. I personally feel now that this is the time for us to resume control and, if we are to underwrite losses, let us do it now for our own benefit, and resume these mines and their workings to be developed by the State. Let us not say we cannot do that until after we have thrown away another £500,000. Let us do it now. For that reason, I propose to vote against the confirmation of this Order.
For Senator O'Donovan's information, might I, first of all, put this whole matter in its proper perspective? Senator Sheehy Skeffington attempted to do that, but he did it with a very strong prejudice against the mode of operation in existence at the moment in Avoca. Mianraí Teoranta expended up to £500,000 on exploration work in this area and, having established that there was copper ore of an economic content present there, the inter-Party Government decided that the time had come when the ore should be worked on a productive basis. They decided, therefore, to lease the mines to a Canadian company, now called the St. Patrick's Copper Mines Limited. The nonsensical attitude to which Senator Sheehy Skeffington referred was, I take it, that adopted by the present Taoiseach, who was then in Opposition. He said that, having regard to the price of copper at the time, the mine was being given rather cheaply to the Canadian interests. He thought that the price of copper might hold, or remain very near its then price, for longer than it in fact did. As I have said, the price fell very sharply. It fell as low as £180 per ton from £430 per ton. That was the main opposition to the transaction which the Minister for Industry and Commerce, Deputy Norton, and the Minister for Finance, Deputy Sweetman, carried out with the Canadian mining interests.
Since then, as I have stated, the company found that as a result of meeting up with old workings the copper content of the mineralised rock that they were processing was not as high as had been anticipated. It transpired that in the old days, before miners were equipped with the techniques available now, they stopped at certain points at which they met with difficulty. It was thought that these difficulties arose because of their lack of modern mining techniques. That may or may not be the case, but at any rate they left in their wake aggregates of material that proved to be lower in ore content than had been anticipated. That was one of the difficulties with which St. Patrick's Copper Mines met.
Their mill capacity was much higher than the amount of ore they were able to extract on the west side as a result of certain difficulties. Following an examination on the east side of the river they discovered that by an admixture of the higher grade ore found there with the ore they were already mining on the west side, they would get ore of a sufficiently high grade to merit economic production. I do not quite understand the Senator's question as to what payments have been made to people who have interested themselves financially in the project. To date, interest payments have been made regularly, but no capital payments of any kind have been made.
The Government have made no payments.
The Government have made no payment.
Have the Government made the interest payments?
The company is meeting the interest payments. As a result of the difficulties which were run into, the company found themselves short of money. The other financial difficulty arose because of certain weaknesses prevailing in the Canadian Stock Markets. I understand it is very difficult at the moment to raise money for any purpose in Canada. That added to the company's difficulties. It did not reflect any particular weakness in this particular project from the Canadian point of view. Other undertakings in Canada which might have the appearance of greater success are experiencing similar difficulties in procuring capital.
As far as the suggestion made by Senator Sheehy Skeffington goes, that we have given away everything and got nothing in return, the fact is that the investment in Ireland in terms of share capital made by the St. Patrick's Copper Mines Limited amounts to $5,000,000 plus $1,000,000 additional raised by way of loan in Canada, making in all some $6,000,000 investment. I take it that has been expended, or committed, to the extent that when they came to require more money, having regard to the difficulty of raising money for any purpose in Canada, they were forced to ask the Government here for a guarantee of this further half million loan which they were able to negotiate here.
I was asked in the Dáil, as I have been asked here to-day by Senator Sheehy Skeffington, about the copper content of the ore. I was given figures as to the content on both the east and the west side in the course of negotiations. I regard the matter as a financial transaction and, from that point of view, I regard the information given to me as confidential. As I said in the Dáil, I do not think I would be permitted to disclose what the content is. The Senator mentioned a figure of 1.1 per cent. When I say that the content of the ore procured latterly on the east side of the Avoca river was slightly less than that, the Senator can draw his own conclusions. It is hoped by the admixture of this ore procured on the east side to bring the copper up to an economic level.
With regard to his question as to what would happen should this House refuse to approve this Order, or should the company 12 months hence find themselves requiring further loan assistance by way of guarantee under the Act, those are hypotheses upon which I do not want to make any statement. The fact remains that the company are satisfied that they can, with this assistance, work these mines and market the copper produced on an economic basis, a basis that will enable them to repay after a time the loans they have got.
I think I should point out that this company is one of high international repute. When the prospecting stage had been completed by Mianraí Teoranta it was found, I understand, by the previous Government that no other company was willing to undertake mining operations in Avoca. As well as that, I believe that even if a company were to be found in this country, there would be some doubt as to whether they would be sufficiently equipped, from the point of view of technique and experience, to work these mines properly. I understand that was one of the considerations which motivated the Minister for Industry and Commerce, in 1956 I think, to negotiate this agreement.
The attitude taken in the Dáil by members on the Opposition side was referred to only slightly by Senator O'Donovan but if this is the brainchild of the Government of which he was a member, it has come home to roost on this Government, and we have to find the money and take the risk of giving the necessary guarantee.
Perhaps you deserve it in view of what you have said about it.
I should like to press the Minister to give us the copper extraction rate. It seems odd that we should be asked to guarantee £500,000 but that we are not to be told the basic facts. The Minister said that is a confidential matter but I should like the House to press him to quote the figure. What was the original forecast and how much lower is the present figure? There is another question I should like to ask the Minister. He said that he was not prepared to go into the question of what will happen if we do not guarantee this loan. I should like him to say what alternative is before us. He suggested that we have no alternative. Is that really what he means? If it is not, I think he should take the House into his confidence and say what the alternative is.
I have a third question. The Minister said that no other company could be got originally to work these mines. I should like to ask him was any other company or body of companies offered the same terms and advantages as were offered to this company?
Perhaps I did not make my question clear to the Minister. It was not a trick question. I am most anxious to ascertain the facts about the original guarantee in the case of £1.3 million. Was the money spent in this country or was it spent in Canada? Was it raised here or was it raised in Canada? The Minister tells us £.5 millions will be raised and spent in this country. This £.5 million is working capital. Perhaps, if the Minister does not feel it is confidential—and, in any event, I do not think it can be—he will tell us was part of the £1.3 million working share capital spent in this country? I hope that makes the question clear.
By far the greater proportion of that money was spent in this country. There were, of course, as the Senator will appreciate, certain capital items of equipment which had to be purchased abroad but they did not involve a very high figure. At this stage, I cannot give a breakdown of the figures.
Senator Sheehy Skeffington repeated the question about the copper content. I told him that I was unable to give that in the Dáil and I still feel that I cannot give it here today because the copper content of the ore is a matter which might affect the financial structure and the disposal and resale, etc., of the shares of the company. Neither am I prepared to base any statement on the hypothetical questions he has put except to say that a number of courses of action will have to be looked into. Assuming the money was not given, I understand it may be the case that the existing mortgage would have to be realised to get whatever value there is in it. It may be that we would seek some other organisation to undertake the mining operations from this point onwards, and it may be, too, that Mianraí Teoranta might undertake the mining operations on behalf of the State. I should like to suggest if the Senator considers that is the best solution——
It is.
It may be, or it may be held, that Mianraí Teoranta would not technically be able to do so with a reasonable prospect of success.
They would.
I give these answers on the basis of hypothetical questions and they are hypothetical answers. I cannot say what action would be taken if the House does not see its way to approve this order. If so, then these considerations will have to be taken into account. Senator Sheehy Skeffington asked, too, whether any other company were given an opportunity of undertaking the production of copper ore in the Avoca area——
On the same terms.
——on the same terms. I suggest that not only this country but the whole world——
Urbi et orbi.
Recourse was had urbi et orbi before the lease was given to St. Patrick's Copper Mines Ltd.
Question put and agreed to, Senator Sheehy Skeffington dissenting.