811.20 Defense (M)/2707b: Telegram
The Acting Secretary of State to the Ambassador in Colombia (Braden)
196. Reference Embassy’s 250 of July 3 and 234 of June 24 and Department’s 124, May 23. Metals Reserve Company is now willing [Page 44] to proceed with the purchase of Colombian platinum upon the following conditions:
1. There must be an effective export control system which will prohibit the export of platinum to any country except the United States, and to other American Republics (or in the case of other American Republics exports must be permitted only for internal consumption and not for re-export).
It appears from your 250 that such an export control system has not been established. The requirement of an irrevocable financing credit opened in a New York bank is obviously not sufficient to prevent Axis purchases. It must be remembered that the freezing orders are not broad enough to prevent the obtaining of letters of credit which would result in the platinum going to undesirable destinations. A solution would be, if possible, to require that the consignee named in the letter of credit be located within the United States.
2. It is understood the South American Gold and Platinum Company, owned by American stockholders, produces about 50 or 60 per cent of the platinum of Colombia and that the current market price obtained by this Company is about $32.00 per ounce of fine platinum, f.o.b. New York. The other producers who are willing to sell to countries other than the United States obtain, it is understood, about $38.00 per ounce for their product. South American Gold and Platinum Company is willing to continue to sell in the American market at the price which it can obtain there. It is accordingly suggested that a Colombian decree permit the producers of platinum either to export their product under an irrevocable letter of credit opened in New York to the order of a consignee located in the United States, or to sell their production to the Bank of the Republic at a fixed price. Metals Reserve Company will then agree to buy at a price to be agreed upon with the Colombian Government all of the platinum acquired by the Bank. It is suggested that this price be (1) $36.00 an ounce for the platinum content of crude metal, the Bank of the Republic to pay its incidental costs out of this gross price or (2) the current price of fine platinum in the United States for the platinum content; whichever of these two prices will be the higher. Since the $36.00 price is and probably will continue to be higher than the market price in the United States, it is assumed that all of the platinum will be bought by the Bank of the Republic and resold to Metals Reserve Company with the exception of the South American Gold and Platinum Company whose production, in accordance with an understanding with us, will continue to be shipped directly to the trade in the United States.
3. The contract will be for one year. It will consist of a commitment of Metals Reserve Company to buy not in excess of a certain fixed number of fine ounces of platinum, say 40,000 ounces. Any [Page 45] amount sold directly to the trade will be credited on the obligation of the Metals Reserve Company to buy. The figure of 40,000 being in excess of the normal production of Colombia is intended to be and is in effect an obligation to acquire the total production of Colombian platinum.
4. You are requested to discuss this proposal with the appropriate Colombian authorities and to start your discussions as has been indicated with the suggested price of $36.00 per ounce for the platinum content of crude. In addition Metals Reserve will pay for other metals contained in the crude platinum $18.00 per ounce for osmiridium, for pure gold $34.50 per troy ounce, and for palladium $15.00 per troy ounce. It is understood that these prices are in accordance with existing commercial practice.
5. These prices are c. i. f. New York. Settlement for the material will be made on the basis of assays by an experienced platinum assayer in the United States. In this connection the Bank of the Republic may wish technical assistance in setting up its own system of purchasing from the producers in Colombia. Metals Reserve would be prepared to send a representative to Colombia to assist in arranging for local assays, and other details that may arise in connection with the purchasing.
When an agreement has been reached in principle on the above proposal, a formal contract will be drafted here and sent to you for submission to the Colombian authorities.
The Department regards the completion of an agreement which will achieve the results above suggested as of substantial and immediate importance to the defense program. It desires that the agreement be put into effect at the earliest practicable moment. It is accordingly suggested that you telegraph the Department as soon as possible as to the course of the negotiations.