STATEMENT OF GRANVILLE S. BORDEN, VICE PRESIDENT AND DIRECTOR, IDAHO-MARYLAND MINES CORP., SAN FRANCISCO, CALIF., ACCOMPANIED BY SIEGFRIED BECHHOLD

Mr. BORDEN. Gentlemen, my name is Granville S. Borden. I am a member of the bar of the Supreme Court of the District of Columbia. I am a member of the bar of the Supreme Court of the United States. I am registered to practice civil engineering under the laws of the State of California. I am a vice president and director of the IdahoMaryland Mines Corp. I am chairman of the tax administration committee of the Tax Executives Institute.

I do not speak for them here, gentlemen, but I would like 15 minutes, 5 minutes for 3 short papers, 1 of which I shall digest, which I have put into the record here now. I would like 5 minutes to discuss with you some specific problems of taxation which embrace percentage depletion, the limitations on operating net loss carryback and carry forwards, and on relief for the recipient of dividends from mining corporations.

I would like 5 minutes to discuss these with you, and the privilege of putting into the record supplemental statements on each of those problems.

If you will grant me 15 minutes I would like to present three papers, one entitled the "Threat to Survival From the Dearth of Metals," another "A Proposal for Relief of the Domestic Miners," and the third "Special Tax Problems of the Metal Miner."

Mr. RIEHLMAN. Mr. Borden, we are delighted to have you here, and with your splendid background that you have stated, you ought to be able to give us a good insight into some of these tremendous problems. Mr. HOSMER. May I ask a question here? Some of these other gentlemen have indicated the number of employees that they represent. I wonder if you could give the employees of the Idaho-Maryland mine. Mr. BORDEN. We have about 160 employees, Mr. Hosmer, and we are having a hard time to hold that many.

Mr. RIEHLMAN. Let me get that correct. You would like to insert those three into the record and make a statement to explain them? Mr. BORDEN. Yes, sir.

Mr. RIEHLMAN. We will not have the opportunity right now to read them and digest them, but you can rest assured that we will go over the record from time to time and insert these statements.

Mr. BORDEN. I might say the one on taxation is an excerpt from an article that I presented at the American Mining Institute, and it was put into the Congressional Record, by Christian Herter, of Massachusetts. That is a matter of the Congressional Record.

I want to say at the outset I am not here to promote any selfish interest of any kind or interest of myself. I am here for the patriotic motive to talk on fundamentals that I believe should be brought to your attention. I realize, of course, that many of the things I shall say are of primary grade factors, but I want to reiterate them because I feel so profoundly that they are important to the destiny of our

country.

Mr. RIEHLMAN. You may proceed, sir.

Mr. BORDEN. I appreciate the privilege of presenting this testimony to you distinguished members of the Small Business Committee of the

83d Congress of the United States about the business of prospecting for metallic-ore deposits.

Our people through their votes and through the provisions of the Constitution of the United States have placed you gentlemen and your colleagues on Capitol Hill in Washington in the driver's seat of the 1953 model of the American car and they have instructed you to guide it down destiny highway.

There are about 150 million back-seat drivers under our form of democracy; it is their right and duty as citizens to strive to keep you from driving recklessly, to keep you from napping at the wheel, and to direct your attention to dangerous spots on the highway ahead of us. Acting now in the capacity of a back-seat driver, I am going to exclaim a lusty "Watch out." I shall direct your attention to an obscure danger, a hazard which in my opinion could cause disaster to our country unless you recognize the danger and eliminate it.

Would you like to order our boys into battle with bows and arrows, slingshots and popguns? But what can they use if there are not enough metallic ingredients for the manufacture of modern weapons and ammunition?

From V-J Day to Korea Day we spent $50 billion for a war machine but hardly a nickel's worth went for the stuff to make it run, and this happened notwithstanding some very narrow escapes from disastrous . shortages of strategic materials in World War II.

I am informed by experts that the situation is not much better today. They tell me that in the event of a hot war should enemy action shut off the flow of foreign imports, our stockpiles would be depleted in a brief period. Then we would be in serious jeopardy of losing the conflict because the capacity to produce metals from the mines in United States is far below the minimum hot-war requirements. Now if these facts are true, and it should not be difficult to obtain the truth, what are we going to do about it? Will we remain apathetic while we are vulnerable to defeat by some barbaric aggressors?

The only recourse is to discover and develop in the United States ample reserves with the installation of adequate capacity to process timely requirements.

Thus the survival of our country, our institutions, the preservation of our freedoms and even our lives may depend upon the degree of success of these ventures where some of our citizens strive to force Mother Nature to disclose where she has hidden her hordes of mineral wealth.

The degree of success of these ventures will depend on how many go hunting and how much money is spent in "them thar hills." But the number who hunt and the number of dollars that will be spent will vary with the economic climate which will enshroud their enterprise. No one will prospect if the fog is too dense to perceive any economic rewards should Old Lady Luck lead to a mineral deposit. No one will bet on a long shot if the rewards of victory are apt to be lost in cheap foreign labor or in confiscatory taxes.

In the stopes of taxation and in DMEA you gentlemen have installed some good ventilating equipment but there are some uninformed in the Congress who would vote to abandon this equipment.

Now, gentlemen of our Congress, here is my prayer:

1. Be ever mindful of this obscure but real threat to our security.

2. Be ever mindful that Uncle Sam is an interested partner in all of these prospecting ventures. He shares in every discovery. Every discovery makes a real contribution to our defense effort. Every discovery constitutes a new weapon to use in the fight against inflation. Every discovery creates a new source of revenue through new tributaries of income and excise taxes which lead directly into the Federal Treasury. Every discovery engenders a new defense against depression and a genuine contribution to the forces which support prosperity. 3. Be alert back on Capitol Hill to the necessity of administering vitamins and stimulants to Mr. United States Prospector.

When proposals are made to our Congress designed to improve the economic climate around exploratory ventures, pitch in there and fight for their enactment-not to promote any selfish interests but to help extinguish this threat to our survival which appears on the horizon down Destiny Way.

Gentlemen, the second paper I have to present is entitled "A Proposal for Relief of the Domestic Gold Miners."

The gold miners have been practically put out of business by the current national policy with regard to gold.

With ownership of gold virtually forbidden except in very limited forms, and with producers required to sell their gold to the Treasury at $35 per ounce a price unchanged for the past 19 years—and with cost of labor and supplies in depreciated paper dollars steadily mounting, profits from most small gold mines have been completely wiped out. The few mines which are operating are sustaining heavy operating losses and depleting their mines of gold-bearing rock which in normal times would be commercial ore.

I can speak with knowledge with a balance sheet in my pocket and an earnings sheet from the Idaho Mining Co. for this year. Ultimate correction of the situation will require restoration of the gold standard with a dollar convertible into gold at a price that per se will be neither deflationary or inflationary. What price should be selected may be highly controversial as far as the experts are concerned; but the depreciation of the dollar since 1934 is painfully obvious. If referred to gold as the stable base during this period the dollar is clearly worth less-or putting it the other way, the price of gold that would reflect its buying power in the free market has risen to some level higher than $35 per ounce.

In the meantime the situation of the gold miners is becoming more and more painful. The gold producers have pleaded with Congress upon many occasions to cure this inequity by raising the statutory price of gold or by creating a free market for gold.

Every attempt to procure relief through these means has gone down to defeat. Why? Obviously a change in the statutory price of gold generates clashes of interest in broad problems in the fields of international finance, international exchanges and currencies, international monetary agreements, tariffs, et cetera.

The gold miners have been told that the cure proposed for their troubles involves too much trouble in world affairs. "You gold miners, although we are sympathetic, are talking in terms of percentages of a production of $50 million annually. A change in the price of gold would involve billions. To cure a slight injury to the body of our national economy we cannot risk a permanent disability to the whole body." Of course, this argument is not founded on sound premises

from the gold-miner's viewpoint, because he believes the remedy which would cure him would not be detrimental but very beneficial to all Americans.

But this is where the problem is stalemated, gentlemen, and in the meantime our gold miners are out of business; their mines are being flooded and the timbers rotting, and the walls in underground excavations are caving.

To give some measure of relief without modifying present monetary policies at the moment and without providing an unfair or special subsidy to the industry, I urge

(1) That the present restrictions on ownership of gold by American citizens be removed; and

(2) That the Treasury cease selling gold to the arts, industries, and professions at $35 per ounce; but, otherwise, leave unchanged its policies with regard to gold.

This action would effective terminate the extremely unfair situation whereby the industrial users of gold are actually subsidized by the Treasury at the expense of the gold mines. Under the proper arrangements, industrial users would buy their gold on the free open market at whatever price was determined by the available supply and demand. It is noteworthy that the consumption of gold-and this is something that is very important in my mind-in the United States, for so-called industrial needs, since the war has exceeded the total output of its domestic mines by $205 million.

Mr. RIEHLMAN. Where have they been procuring? Does that come out of the reserves somewhere?

Mr. BORDEN. I understand it is sold by the Treasury to industrial

users.

Mr. RIEHLMAN. It is loaned to them?

Mr. BORDEN. It is sold to them at $35 an ounce, and they write the price up of their manufactured products in the arts, and a filling in your tooth, and it will be about $150 an ounce.

Mr. HOSMER. In that connection, this particular metal is probably not in the same standing as manganese and some of these other metals in defense.

Mr. BORDEN. That is true as to your personal viewpoint. I feel that gold is as important in our economy as anything else.

Mr. HOSMER. It is in a different manner, shall we say, but not for the production of war materials?

Mr. BORDEN. Yes, sir.

I want to refresh your recollection, perhaps. You are all younger than I am, but I am able to recall very well that in World War I the only metal that was exempt from excess-profits tax was gold, and we had to make an allocation between the cost and proceeds from gold and silver when we sent our bullion in order to pay an excess-profits tax on the silver but not on the gold.

Mr. McCULLOCH. What is the world free-market price of gold, if any?

Mr. BORDEN. I don't know. It is every dollar from $37 to $80, if you took a vote now. I don't know what it is in Bombay. It is different than it is in Beirut, and it is different in Tangiers, I don't know. . Mr. McCULLOCH. On the average what would it be?

Mr. BORDEN. I don't know. We have just been through-I have in a legal capacity-a big argument with the King of Arabia about that, and it wound up that we made a settlement on the basis of about $78.

Mr. McCULLOCH. I take it from that statement that we are not acquiring any gold from foreign sources?

Mr. BORDEN. No, sir.

Mr. McCULLOCH. When did that acquisition end?

Mr. BORDEN. I don't know on the exchange of gold in international finance, if that is what you mean, Mr. Congressman. I am sure we are doing that. We are exchanging it.

Mr. McCULLOCH. Well, if it is over a longer period of time, of course we acquired gold on the free world market at $35 an ounce, didn't we? Wasn't the free market as low as that sometime after 1933?

Mr. BORDEN. I don't think it has ever reached that in the last decade.

I will ask if anybody here can answer that question.

Mr. McCULLOCH. How about since 1933 or 1934? Has it reached $35 an ounce?

Mr. BORDEN. Of course, there was a jump of $20 in the statutory price from $20.67 up to $35 in 1933, with the Gold Act. When the Gold Act came in in 1933, it raised the price from $20.67 to $35.

Mr. McCULLOCH. There was a period when we acquired gold from the producers of the world, obviously, wasn't there?

Mr. BORDEN. Yes.

Mr. McCULLOCH. You don't know when that period ended?

Mr. BORDEN. No; I don't. But, in the relative purchasing power of labor and materials, it has never gone back to $35 with this inflation going on.

Mr. HOSMER. What advantage to the general economy of the United States distinguished from the gold-mining industry itself would be gained by changes in policy that you suggest here?

Mr. BORDEN. Well, the changes I propose here, Mr. Congressman, are merely to shift the profits from the industrial users and the arts over to the gold miners where they belong. This fixing the statutory price at $35 obviously raises the grade of ore that you can mine and profit. Unless you are fortunate to have a grade of ore that can be mined and profited at $35, under present labor costs and material costs, you are out of business.

Mr. McCULLOCH. Are you producing now?

Mr. BORDEN. Yes.

Mr. HOSMER. Would it be to the advantage to have the gold increased?

Mr. BORDEN. Yes. Idaho-Maryland produced $113,000 in March, and it cost them $138,000. They took that loss in the month of March, a loss in the month of March, alone.

Mr. HOSMER. Is there any particular advantage to the general economy in having the gold production in the United States increased? Mr. BORDEN. Definitely, sir.

Mr. HOSMER. What is that?

Mr. BORDEN. Well, you are leading into a broad international problem that I would like to write a book on. But it is clearly evident to me that to have this discrimination against the producers of gold in the United States and allow somebody that is producing gold down in Nicaragua, at a mine that I used to operate, sell theirs in the world market-there is something wrong with that.

Mr. HOSMER. I am talking about, let's say, the consumers of the United States of America as a group. What advantage would it be to them?