Plugged Nickel

Like a hot-blooded Don Juan, the Government makes some extravagant promises when it sorely wants something from industry. But once it gets what it wants, the Government often cools rapidly.

To build up its nickel supply during World War II, the U.S. signed at least 28 long-term purchase contracts for nickel, now is trying to wiggle out of every one of them, because there is a nickel glut. The U.S. estimates that it has lost $31 million by paying premium prices for nickel, stands to lose $124 million if it honors all its contracts.

Last week a House Government Operations subcommittee, investigating some of these nickel deals, wanted to know particularly why the U.S. cannot cut its nickel purchases and get out of the nickel business by selling its $87 million Nicaro nickel plant in eastern Cuba (current annual production: 52 million lbs., about 11% of the free world's supply).

The big obstacle is that the U.S. has contracted to pay steep royalties to Freeport Sulphur Co. for the ore that the plant uses, is even now battling to renegotiate the contract and slash the royalties. Few companies are willing to bid on the plant until peace is declared and a steady stream of ore is guaranteed at a good price.

Price Fight. When the Government built the Nicaro plant in 1942, it badly needed ore to feed it. Freeport Sulphur Co. owned a rich ore body just four to eight miles away, and the Government lent $1,100,000 to Freeport to develop the ore. The Government promised to buy at least one-third of Nicaro's ore needs from Freeport through 1968, now gets all of Nicaro's ore from Freeport, pays a royalty of $1.73 per ton, and also pays the cost of extracting the ore. The Bureau of Mines contends that the Government, which operates the mine, should pay only

60-c- to 90-c-.

Last year Freeport offered to cut the price to $1.24 if the Government would sign an irrevocable contract to buy at least two-thirds of its Nicaro ore needs from Freeport through 1978. General Services Administrator Franklin Floete turned down the offer, called on Lawyer Ira D. Beynon, 62, to clean up the Nicaro dispute. Beynon attacked the chore with vigor. Testified Freeport Sulphur's President Langbourne Williams: "Mr. Beynon began to call us names, to threaten us with congressional investigations. He said, 'You reduce [the ore price] or I'll shut this plant down. We don't need your ore. We've got all the ore we need.' "

Then Freeport's Williams did something that widely irritated official Washington and raised many an eyebrow in business circles. He hired an ex-FBI investigator to question Beynon's old friends and associates about his private life as far back as 1926. Beynon testified that the inquisitor asked his friends such questions as "I'd like to know how Mr. Beynon made his money." Williams also checked police records on Beynon, but all he could dig up was a traffic violation. Explained Williams: "It's normal business practice for me to find out all I can about the man I'm dealing with." Yet he admitted that Freeport had never before hired a private eye to track a man.

Tears & Profit. Last week Beynon wept openly as he told Congressmen how Freeport had pried into his personal life. Said he: "The contract under which we are buying ore from Freeport is unconscionable, and I am going to do everything I can do to remedy this situation. These kinds of deals destroy confidence."

In rebuttal, Freeport argued that it had opened up the ore supply, run the Nicaro plant for the U.S. in World War II, and developed many nickel-production techniques that the Government now uses. But it also profited. Freeport has collected $13.7 million in Nicaro royalties from the Government since 1952, now gets about $3,500,000 per year. More than that, the Government last year made it possible for Freeport to get financing for a huge $119 million nickel-and-cobalt operation, abuilding at Moa Bay, Cuba, near Nicaro. The U.S. did so by signing a contract, which the committee is also investigating, to buy up to 271 million Ibs. of Freeport's Moa Bay nickel at 74-c- per Ib. and 23,835,000 lbs. of cobalt at $2 per Ib. Since then, the nickel market has suddenly softened.

As for the Nicaro deal with Freeport, the Government next month will complete a 15-mile railroad from the Nicaro plant to a Government-owned mine that holds 43 million tons of nickel ore, enough to supply the nickel plant for 17 years. The Government can then cancel its royalty contract with Freeport on six months' notice, and it probably will do so unless Freeport slices the price. In any case, the U.S. will be able to supply Nicaro from its own sources, or sell the Nicaro plant. At least two companies are interested: National Lead and Freeport itself.

This file is automatically generated by a robot program, so reader's discretion is required.