Mr. Churchill, accompanied by Gilchrist of Eldorado and Ritchie of the Embassy, attended a meeting with Mr. McCone at 2:30 p.m. on April 13. Johnson, Olson and Upchurch of the AEC were also present.

2. Mr. Churchill explained that the submission on this subject at this stage was being made by Eldorado, the Canadian Crown Corporation involved in arranging the uranium contracts with the AEC. His main reason for coming down on this occasion was to meet Mr. McCone and to stress the importance attached by the Canadian Government to the position of the uranium industry in Canada. Several times during the past two years he had discussed with members of the United States Administration various other matters affecting relations between the United States and Canada. He was sure that the present problem would also be considered against the background of the general relations between the two countries.

3. Mr. Gilchrist then presented the views of Eldorado along the lines set out in the attached memorandum.? He was not pressing for an immediate decision on the question of the options, but he was anxious that consideration of the problems involved should be initiated in the near future. He noted that normally firms engaged in underground mining had to make their plans some four or five years in advance. He thought that the period between March of 1961 and various dates in 1962-63 was really too short for prudent planning. It was most desirable, therefore, that the AEC should make up its mind and declare its policy a good while before the formal option date.

4. Mr. McCone appreciated the background sketched by Mr. Gilchrist. The Commissioners of the AEC "were not blind" to the important part which the Canadian uranium industry had played in the development of the United States atomic energy programme (for weapons and other purposes). They also "were not blind" to the great importance of United States-Canadian relations. At the same time, they were accountable to Congress and to the United States tax-payer. Since there was so much uncertainty about the prospect ahead, he did not see how they could possibly take a decision on the option question very far in advance of the date specified in the contracts. Some witnesses before the congressional committees had testified that the United States had more bombs than it needed. Others had argued for a substantially larger accumulation of weapons. In April 1958, it would not have been possible to foresee that by April 1959 discussions would be taking place aimed at the possible suspension of nuclear tests. The situation had changed frequently in the past and it could change drastically in the future. With so much uncertainty ahead, no one would understand, or accept, a decision now by the AEC about its uranium requirements after 1962-63.

5. Mr. McCone mentioned that in his private business he had chartered several ships to the United States Steel Company under contracts which included an option clause. He would like nothing better than to get a decision from United100 States Steel now that those options would be taken up. He knew, however, that if he went to that Company and made such a proposition, the Company would answer that it had until a specified date in the future to make up its mind, and that it could not justify an earlier decision to its stockholders since the movement of iron ore in the future could not be confidently predicted. He thought there was some similarity between this case and the case of the uranium contracts with Canada.

6. Mr. McCone noted that while some of the Canadian companies might encounter financial difficulties after 1962-63, others were in a pretty healthy position and seemed very likely to amass substantial profits over the period. Even the ones which might be left with a heavy bonded indebtedness would have fairly clear titles to some valuable properties and equipment. The United States taxpayers would not see much reason why they should rescue companies which generally had not done too badly out of the whole operation. He noted that the taxpayers of the United States were spending about 500 million dollars a year on uranium of which some 100 million dollars was in excess of actual requirements. They also had financed about 7 billion dollars worth of plant with no prospect of any financial return. These things they had done for the defence of this continent and of the "free world." He was afraid that someone might use the old cliché that the American taxpayers are expected to pay for the defence of the Western world, while the Canadians do their part for a 6% return.

7. In general, Mr. McCone thought that the big decisions had to be deferred until the situation was much clearer. The United States authorities last year had attempted to limit their obligations by putting an end to the open commitment which they had previously extended to domestic producers of uranium. Their present commitments to the domestic industry would apparently run out around the same time as the Canadian contracts. The AEC would obviously have to look at the whole situation in deciding what it was going to do for the future.

8. Mr. McCone understood the concern felt in Canada over the hardships confronting some of the communities which were dependant entirely on uranium production. He himself had grown up in the mining areas of the western United States and knew how dislocating the closing down of mine could be. He had seen many ghost towns and they were indeed a sorry sight. Mr. Gilchrist intervened to remark that most of the ghost towns mentioned by Mr. McCone had declined fairly gradually. The uranium communities in Canada were faced with the possibility of a sudden and abrupt cut-off. The difficulties for people in these communities would, therefore, be much more serious. These people were already finding it difficult in all the uncertainty to make plans for themselves and their families.

9. Mr. McCone said that while the Commission could not even look at the option question until much nearer to March 1961, they would be prepared to examine the possibility of a mutually satisfactory arrangement for "stretching out" deliveries under the existing contracts. He thought that some three or four thousand tons scheduled for delivery in each of the years from 1959 to 1963 might be carried forward into the period from 1963 to 1966. The possibility of some such a "stretch out" had been discussed with the members of the Joint Congressional Committee and with the President. There was no objection to this course and the Commission had authorized Mr. Jesse Johnson to explore the matter with the Canadian authorities. The Commission would be prepared to consider quickly any recommendation which Mr. Johnson might make. If the United States budget of the next three or four years was to get the maximum benefit from the deferment of shipments and if the Canadian industry was to have the maximum amount carried forward to help in filling out the lean years, it was important that any decision to spread the contract quantities over a long period should be taken soon. Mr. McCone emphasized that he was prepared to see the possibility of a "stretch out" examined only if it were to be separated completely from the option question.

10. Mr. Churchill expressed the view that this exploratory discussion had been useful. He agreed that future discussions on the possibilities should be held very soon. On the option question, even though a definite decision were to be withheld, he thought it might become desirable for some indication to be given that a negative decision had not been taken. In other words, it might be well for the industry and the public to realize that the absence of any decision did not mean that the options, in whole or in part, would never be taken up.

11. It was agreed that for the immediate future no reference would be made to the option question in anything which had to be said publicly about the present talks. It would merely be indicated that discussion had taken place on common problems, including problems relating to the uranium industry.

12. In the course of the discussion, there was some question about the extent to which the United States Government had been involved in financing uranium production in other coun-tries such as South Africa and Australia, and also about the extent to which those producers had been guaranteed a profit. In the case of South Africa, United States financial assistance had taken the form of a loan from the Export-Import Bank which had been sponsored or supported by the AEC. So far as profits were concerned, the South African producers were "guaranteed" a profit only if they could produce within the established (or negotiated) ceiling.

13. There was some discussion about the confusion that might be caused by private Canadian firms in the uranium industry making direct approaches in Washington. It was recognized that the formal channel for discussions on these matters should be Eldorado (or appropriate representatives of the Canadian Government). While the AEC and the Congressional people might receive representatives of the Canadian firms, this would only be a courtesy and should not involve substantial or formal discussions.

14. At the end of the meeting, McCone remarked (possibly rather significantly) that he would like a copy of Eldorado's submission to give to Mr. Dillon in the State Department. This would appear to indicate that the State Department is being consulted, or at least kept informed, at a high level.

15. Mr. McCone was quite pessimistic about the prospective demand for uranium for peaceful purposes. He quoted an estimate which had been given to him that (as I understand it) a generating capacity of 1,000,000 kilowatts based on natural uranium would absorb only about 1% of the uranium production of the United States and Canada. At this rate he did not see much chance of atomic power development creating a market for the world's uranium output in the foreseeable future.

16. Mr. McCone also said at one point in the discussion that "so long as I am Chairman," the AEC will not forget the effort which Canada made to meet United States requirements in critical times in the past.

A.E. RITCHIE