NAURU PHOSPHATES

Dominion, Volume 12, Issue 272, 13 August 1919, Page 8

NAURU PHOSPHATES

THE PURCHASE AGREEMENT

DETAILS OF THE BARGAIN

ASSURED SUPPLY OF FERTILISERS

In a few years after this time it will perhaps bo 'found by the producer-; of this country that the arrangements made by Mr. Massey on behalf of New Zealand for a supply of phosphatic manures from Nauru Island was the most important piece of work for the farmers of New Zealand that was done at the irecent big Conference. Ever since the war began all kinds of fertilisers have been in short supply, almost unobtainable, in fact. This country has great need of phosphatic manures at a reasonable price, and there are supplies in sight on Nauru Island which may bo considered at present ample for the requirements of Now Zealand and Australia, and sufficient also to supply i Britain with any that she may require. Tha. Island, At the outbreak of war Nauru Island be'.onged to Gcrmaar, but along with other Pacific Islands belonging to the onomy it was taken in occupation soon after''the declaration of war, and the troops detailed for the duty happened to be Australian troops. ' It was quite a bloodless conquest. But for the deposits of phosphates, Nauru is of no value, and even under German rule the phosphates belonged to a British company, the Pacific Phosphates Company, ' Ltd., and this company also held all rights over similar deposits on Ocean Island. At tho outbreak of war, twothirds of the company's white staff of 56, were British,, 'but a month after tho outbreak of war these Britishers were expelled from Nauru by the German authorities, and transferred to Ocean Hand, which was, and still ,is. British. Two months later, in November, 1914, an armed guard from the Australian Expeditionary Force was sent from Kabaul, tho detachment being carried in one of the company's steamers. The company hold rights over Nauru from tho German Government on a 99 years/ lease, and it has still the same tenure from 1 the British Government in respect of phosphates on Ocean Island. Rich Deposits. It is quite impossible to get reliable' 1 information as to the amount of phosphates on Nauru Island. The Germans oslimated that the total was three hundied million tons, of a total value of seven and a half milliards of marks. British experts have given such widely differing estimates as 42,500,000 tons, and 4U,000,000 tons. Tho Nauru phosphates arejif high quality, said to linve been worth ,£3 per ton on tho wharf at Nauru before the war. Ocean Island phosphates were worth rattier less than half this price. The Pacific Phosphates Company has a nominal capital of £1,200,000, of which £787,500 has been issued. The company has paid dividends at the rate of 30 per cent., and 25 per cent., but during the war yeare flio profits seem to havo shrunk considerably, and Uhe rate of dividend in the first years of the war—the last for which information in available—was 7J per cent. The output fibm Nauru before the war was from .00,000 to 100,000 tons annually, and from Ocean Island tho output shrank during tho war from 250,000 to 100,000 tons. ill., reduction' being due principally to scarcity of shipping. The Mandate, This- company Tiad control of all the phosphate deposits south of the Equator, a situation which never could have been satisfactory to New Zealand and Australia. ' Several times the Government of New Zealand was asked to consider tinquestion of acquiring rights over some phosphates in some Pacific island, but the opportunity never offered until the war settlement made it possible to vary some of the existing arrangements. Mr. Massey first mentioned the matter in a dispatch- dated January, 1915, sent through the Governor-General to the Secretary of State for the Colonies. Several times' since then the New Zealand Government has sent correspondence, and Mr. Massey has on more than one occasion discussed the matter with representatives of His Majesty's Government in London. Always the reply was that the'business could not be dealt with until the final eettlemont was being made at tho end of the war. When the end of the war did como, tho allocation of such possessions as tho Pacific Islands had to be made under the mandatories scheme, which was part of the League of Nations iden. The mandatories for all these islands had to be given to Britain or some Dominion. Australia claimed Nauru by right of conquest and possession, but control of tho phosphates by Australia might not havo been very much belter for New Zealand than control by the British' company At any rate, Mr. Massey opposed Mr. Hni;hes in this, and in the end tho mandate was taken by the British Empire, and a proposal made by Mr. Massey was adopted. The mandate went to Britain, and in turn the British Government miade an agreement with the Governments of Australia and Now Zealand for tho administration of tho Island of Nauru, and fcr the. distribution of the phosphate* from the island. Under the agreement it is provided that the administration ot the island shall be vested in an administrator. Tho first administrator is to bo appointed by the Australian Government for a term of five years, and thereafter the appointment is to bu made in such manner as the three Governments decide. There is also to be a Board of Commissioners, ono to be appointed by each- of tho Government's parties to the agreement. The administrator and tho commissioners are to exercise all tho ordinary functions ot government on such a tropical island, except the levying of taxes. All tho revenues are to come from tho sale of the phosphates. Company Has Rights. The arrangement for the purchase of tho phosphates by the three Governments jointly will, of course, have to be ratified bv the New Zealand Parliament. The company was a British company, and its rights were indefeasible. _ The British Govornment could not simply confiscate the property of the company in the manner that it might have done had tho company teen German. The company paid to the German Government royalties for the phosphates exported at the rate of about Is. 6d. a ton. Those German rights have been extinguished, and the company will now become a concessionaire of the British Government. But the company has erected plant for quarrvjnfjr the roeK »"fl for grinding it and shipping it. There have been as many as lliOO workers enwetl in tho enterprise, so that it -must iVadmitted that the eomnany has built up a considerable goodwill, for which the British Government as mandatory ought in good conscience to pay in taking ov-»r the rights of the company. Purchase of the Tights of the company u. desired by the representatives of all 'three Government's parties to tho wtree-' ni"iit and the agreement lays down terms on which the purchase may be made The company asserts that its ri"h:ts are worth three millions sterling but this is a matter on which thero may be strong differences of opinion Tt'sscms to be quite safe to say that tho quantity of phosphates available from the island is sixty million tons, and at three millions as tho purchase price, this works out at. a shilling a ton. Proportions of Cost and Distribution. As tho agreement declares tho proportions in which (he phosphates nro to be apportioned among the threo countriesI Britain Australia, and Now /eaalnd-so ' it declares that the cost of purchase must be borne in the same proportion by the Governments concerned. This part of Ihe «»iwment is nnl vet quite definitely setllod, fcr it is si ill left to the Governments by agreement to come, to another a"iwmeiit as io how tho cost is to be apportioned, but if no such other agreement is made within three months of the raining into force of the agreement, then Ihe position is as slated—flint (ho several Governments must bear the cost in the same proportions as those in which tho output is to be allocated among them. Theso proportions are: Britain, 42 per cent.; Australia, 42 per cent.; and New Zealand, 10 per cent. The proportion allowed to Now Zealond doe's not seem to.

bo largo, but thero are possibilities of moro coming to us. Phosphates are to be supplied to the three (jovernmonts at tho same f.o.b. price, to be fixed at a rato sufficient to cover working expenses, cost of management, contribution to administrative expenses (and tho contributions nro to bo in the proportions in which the Governments are to receive shares of the output of phosphates), interest on capital, a sinking fund for the redemption of capital, and for other purposes agreed upon unanimously by tho commissioners. No royalties will be payable. If it should happen that any Government does not reuire its full share of phosphates, the portion not required must bo sold at the fixed price to any other of tho three Governments requiring the phosphates for the use of its own country, aiul not for export. If there should still in any year bo a surplus not required by any of tho three countries, the phosphates may be sold by the commissioners at the best price obtainable. It does seem to be highly probable that Britain will not be taking phosphates from this 'side of the world at the high freights now payable, and in that case New Zealand should bo able to get much more than her share of 16 per cent. And at the same timo she will not makeherself rsponsible under tho agreement for more than 16 per cent, of the purchase and administration cost. Of course Australia will have- a right also to the surplus not required by Britain, but Australia is getting a big share nlready, and may not need more for homo consumption. If Australia does want the phosphates, they will be divided between 'Australia; and New Zealand in the proportions agreed upon for the division in the first instance. At the end of the first five years the basis of aJitotnient may be altered, and every fivo years thereafter, and it is agreed that the basis of readjustment is to be in accordance with tihe actual requirements of each country. But under no circumstances can the proportion of contribution towards cost be altered, after having once been made.

Another clause in the agreement provides for the caso of the supply being in excess of the requirements of any of the three countries who will be the owners of tho enterprise. The o'.ause runs: "Where any proportion of the allotment of one of the Governments is not' taken up by that Government, that Govornment shall, when the phosphates are sold, be credited with the amount of the cost price as fixed by the commissioners, but if such phosphates are sold to a purchaser other than one of the Governments, any profit above the said cost price shall be carried to tho. surplus fund." This surplus fund is to be the property of the Governments who are to be tho partners in the venture, and it villi be held in trust for them, being credited to them in tho proportions in which. thoy contribute in tho first instance towairds tho cost of buying; ont the company. It may b9 assumed that the Governments concerned will require that these surplus funds, if any, shall be paid over to them at suitablo times.

What it Means to Farmers, The scheme, if adopted, will make assured a supply of phosphatic manures to this country. Prior' to the war the Japanese Shipped phosphates from the island to Japan, converted them there into superphosphates, and then sold these ' superphosphates in New Zealand and other markets. Why manufacturers of fertilisers in New Zealand did < not use fertilisers from Nauru it is difficult to say, ag they are of vory high' duality, 6ome of the richest in'the wonM. Often in tho past phosphates have t>cen applied in the form of basio slag, but supplies of this are not likely to be obtainable for many years.' In Britain tho output of all tho furnaces dealing with ores of the right analyses has been purchased on account of tho Brit.' ish former. There will'be none from' Germany for some little time. We ltuet get our phosphates .from the Pacific Islands, nud this agreement' will ensuro that the Now Zealariu farmer, who wih Deed such fertilisers more and more in the years to come, will get them without being compelled to pay a scarcity price for them. He will get them at « price equal to tho cost of production with freights added, with possibly w small charge on account of adminfstra tion costs. MR. MASSEY'S OPINIONS. GOOD BARGAINS FOR NEW ZEALAND'. A'.'short statement of. his opinions about the Nauru proposition was mads by the' Prime Minister to a (reporter yesterday. \ , "I think it will be quite possible." said Mr. Massey, "to export half a million tons of phosphates from Nauru when tho enterprise is fully developed. This may not be for a few years, but when the initial difficulties are overcome I am.sure that New Zealand will l>o vej7 glad to havo these phosphates from Nauru, first because tho sea carriage should not bo expensive over such a relatively short distance, and secondly because the phosphates are of high quality. Of the total output, which I have suggested may be 500,000 tons a year, New Zealand wilt probably reqiiirb 100,000 tons. Australia will need at least double this-quantity, for I understand they are using phosphatic manures to treat ground being prepared for a wheat crop." In reply to questions Mr. Massey said that he thought that probably payment' would be made by debentures bearing interest, and the Governments would'havo to establish sinking funds, at such a. rate as to make possible, the redemption of tho debentures ui 25 or' 30 years.