Evening star., 1942-06-21
Rising Costs Plague
Producers Of Gold
And Silver
Lack Of Equipment
And Steady Loss Of
Workers Reported
srscial Dispatch TO The Star.

Special Dispatch to The Star.
NEW YORK. June 20.-Gold pro-
duction will decline as labor and
material shortages become more
acute. according to the current sur
vey of the gold and silver mining
industries released by Standard q
Poor's this week.
Emphasis on base metal produc-
ton may expand by-product recov-
cry of silver, but output of COM
panies which are primarily silver
mines will recede.
Profit margins of precious metal
mines are narrowing under the pres
sure of increased material and wage
costs and the high labor turnover,
which reduces efficiency. A larger
share of operating incomes will be
absorbed by higher tax rates.
A greater number of small gold
producers in the United States
are likely to close down as result
of the priorities on mining equip
ment. Meanwhile, an added prob
lem is the steady loss of mine work.
ers in the United States, in Canada,
and elsewhere to the armed forces
and to war essential industries, in
cluding base metal mining.
No change in the gold policy of the
United States is indicated. The Pres
ident's power to raise the price of
gold to as much as saba an ounce
will not terminate until June 80,
l943, but the Administration is not
likely to use this power, as its pres
ent efforts are being directed against
inflationary measures. Moreover, to
discontinue gold purchases would
hamper trade with Latin America
and also add to the burden of lease
lend.
Labor Is Major Cost.
Labor costs represent the major
operating expense for gold and sill
yer producers, except for placer
work. which is essentially a mechan-
ical operation. They ordinarily do
not change much in the strictly gold
mining camps, but rising living costs
have brought about some increases,
and further adjustments may be
necessary.
The situation is more clearly en-
phasized in Canada, where wage ad-
justments automatically tie in with
the trend of living costs through a
bonus arrangement. During the first
seven months of 1941, this bonus
amounted to sl50 a week, but sub
sequent advances brought the figure
to S368 a week by the end of the
year. While further increases seem
likely these probably will be mod
crate. because of price and wage
controls
Production has already been hand
icapped by actual shortages of ma
terials. However, priority assistance
in mining machinery and equipment
has been available since May IS to
domestic mines producing wares
sential minerals, irrespective of the
gold and silver content of ores mined.
With labor and material costs ris-
Ing. estimates of recoverable ore re-
serves may be adjusted downward
by some companies to conform with
changed costs. Lack Of essential sup
plies and labor probably will compel
many marginal concerns to cease op-
erations.
Taxes More BurdensOme.
The fact that average earnings
were high during the base years has
enabled both domestic and Canadian
producers to escape much of the eX-
cess profits tax. Nevertheless, nor
NAL taxes levied by the United States
will be considerably higher this year.
However. the threat of reduced de-
pletion allowances, advocated by the
Treasury to increase taxes, has been
largely removed
Operating incomes of most con-
Germs will be lower this year because
of the expected decline in gold out
put and the further rise in operating
costs. Heavier taxes will accentuate
the declines in net.
Silver Mine Earnings Lower.
No early change in silver prices is
expected, although a Senate group is
seeking price of 81 an ounce. The
good neighbor policy will dictate
maintenance of the price paid for
foreign silver, the only silver price
which mag be altered at the admin
istration's discretion.
The Silver Purchase Act places an
additional burden on, the Treasury
and, by subsidizing domestic mines,
Is tending to hold back labor and
materials from more essential fields.
However, the silver bloc in the Sen
ate seems sufficiently strong to pre-
vent any early revision.
In most instances. increases in sill
yer production will be more than
offset by higher costs and taxes. with
the poorest showing made by strictly
silver producers.