Unproductive local prospecting and industrialisation attempts
The mining history of the MOS Iron Mine began in 1906 when the Hong Kong Iron Mining Co. Ltd. (HKIMC) under the leadership of Sir Paul Chater (then a powerful businessman cum politician) was granted a prospecting and a mining licence. According to Chinese Mail (1907), Japanese merchants were interested in buying iron ore then but Sir Paul Chater had plans to set up an iron and steel department in his business. However, when Sir Chater passed away in 1926, the HKIMC surrendered the mining lot in the same year. The New Territories Mining Company (NTMC) was granted a lease of mining in 1931 for 50 years. These early mining attempts were mostly unsuccessful due to unstable socio-political situation, including WWII (Table 5.1) as mining is a capital-intensive industry and the time for prospecting – the precursor to actual mining – could take a decade or more even in times of peace. Without proper investment, mining was conducted on a small scale with coolies grubbing on the surface of the land. That was no comparison to mechanisation of the mining industry in the United States and its modernisation in Japan at the turn of the 20th century. While there was no international market, the iron ore was consumed by the local Green Island Cement Company.
MOS was found to contain iron ores.
Hong Kong Iron Mining Company (HKIM) under the leadership of Sir Paul Chater, a powerful businessman cum politician in the colony, was granted a prospecting and a mining license, and thus planned to operate at MOS and develop a steelwork in Hong Kong.
Sir Paul Chater passed away. HKIM ceased its development plan and surrendered the mining lot.
New Territories Iron Company (NTMC) was granted a lease of mining for 50 years.
Japanese military occupied Hong Kong. It was said that the Japanese hired about 1500 workers to extract iron ores from MOS for military supply.
Mining right was subleased to South China Iron Smelters (SCIS).
Exchange earning endeavour fuelled by the Cold War
This short period was critical for the subsequent development of the MOS Iron Mine. Political and economic events in the regional and global contexts had eventually led to the taking over of the Mine by a trading company interested in earning foreign exchange through the export of iron ore to Japan. The taking over of the Mine by the Mutual Trust Company in 1949 marked the transition of a local-production-local-consumption mode to a local-production-for-export mode. This was made possible as a result of gradual normalisation of trade with Japan under the American-led occupation. And supply from South Asia was preferred to distant locations during the occupation of Japan by the Supreme Commander for the Allied Powers (SCAP) (1945-1952). In 1949, SCIS, lacking sufficient capital to resume its mining activities at MOS, signed an agreement with the Mutual Trust Company (renamed in 1953 as Mutual Mining and Trading Company (MMTC)) and started extracting iron ore for export to Japan. The expansion of trading of raw materials with Japan was made possible partially due to the “reverse course” of SCAP and the US in 1948 given the then impending Communist takeover of China. The US policy towards Japan made a 180-degree shift from punishing the country and transferring its industrial capacity to the rest of Asia as reparations towards one that sought to rebuild its strength to prevent the spread of communism in Asia.
Another reason for the Mutual Trust Company to invest in the mining operation had to do with the “return percentage exchange allocation” policy (the privilege of importing goods up to the value of a certain percentage of exports). The Company was offered 65% return exchange allocations on exports of iron ore from Hong Kong in 1950, a special privilege enjoyed by iron ore exporters. The “return percentage exchange allocation” policy ended when the trading account between Hong Kong and Japan shifted from dollar to sterling pound in 1951. Boosting export to Japan also suited the British interest in the post-WWII era. Shortly after the end of WWII, Britain had huge sterling liabilities inherited from the war. Since US dollars were in much higher demand given its economic prominence, devaluation of sterling pounds was inevitable and Britain had to place strict control over the convertibility of sterling pounds into dollars and encourage exports from its colonies to dollar regions to prevent further dollar drain. Therefore, exporting iron ore from Hong Kong to Japan, which was considered as a dollar region at that time, was deemed favourable by the Colonial Government to earn dollars, especially as there was an extremely high excess of imports from Japan over exports from Hong Kong . Given the emerging Cold War reality and the threat of communism over Britain’s colonies and its own interest in Southeast Asia, Britain made the 1951 Payment Agreement with Japan and the devaluation of sterling encouraged Japan to use its extra sterling pounds to trade with Hong Kong and other Southeast Asian countries.
The Treaty of San Francisco signed in 1951 officially ended the American-led Allied Occupation of Japan and marked the return of Japan as an independent nation. From 1951 to 1952, several inspecting visits of the MOS Iron Mine by different Japanese companies were reported in the news. Historical documents in Japanese also recorded the export of MOS iron ore to four Japanese iron and steel production companies (Yawata Iron & Steel Co., Fuji Iron & Steel Co., Nippon Koukan, Sumitomo Metal Industries) from 1949 to 1952 before a contract was signed in 1953.
Mining during this period was entirely open-pit and labour intensive since the influx of refugees from China provided abundant cheap labour. Miners were not direct employees of the Company. A kind of subcontracting system developed and job seekers would report to a subcontractor who liaised with the company and organised their work and livelihood, including their daily needs.
As the grade of the MOS iron ore was low, the Mutual Trust Company had to purchase higher quality iron ore from Hainan Island in China to enhance its quality. However, the “liberation” of Hainan by the People’s Republic of China ended this supply channel in 1950. By 1952, the grade of the iron ore extracted from MOS was so low that the Japanese buyers considered discontinuing the purchase from MMTC unless the quality could be improved. As a result, the four iron and steel production companies entrusted eight investigators from the Nittetsu Mining Company to investigate the iron ore at MOS. The recommendation was that the grade of the iron ore could be improved from 32% to 58% if the MOS Iron Mine adopted the ore dressing technique practised in the Kamaishi Mining Station (which was belonged to Nittetsu) and Yawata Iron & Steel Co. then promised to continue to purchase the iron ore of MOS as long as the Nittetsu Mining Company provided technical and management guidance. Since the exploration of iron ore by Japanese companies was promising, it led to official Japanese investment in 1953. After officially signing a contract with the MMTC in October 1953, the Nittetsu Mining Company established its branch office in Hong Kong in December and started the construction of the ore dressing plant the following March.
Mutual Trust Company signed a contract with SCIS who lacked capital at the time and started its operation at MOS.
Three students studying at the Lutheran Theological Seminary visited MOS and started their missionary work.
Nittetsu Mining Corporation sent eight technical staff to MOS.
The Catholic Church was completed.
The Evangelical Lutheran Church was established at MOS.
Nittetsu Mining Corporation and Mutual Trust Company signed an agreement on their cooperation.
Japanese-led mechanisation of the mine
The involvement of the Nittetsu Mining Company marked the beginning of a new era for the MOS Iron Mine, transforming it from a labour-intensive open-pit mining site to a mechanised and rationalised mine fully operated underground. The Nittetsu Mining Company started the construction of the ore dressing (mineral preparation) plant in March 1954, which was completed by the end of the year. In 1954, a fully mechanised ore dressing (mineral preparation) plant began operation, ending hand-sorting works. The joint venture also helped restructure MMTC into a more sophisticated operation. However, mechanisation also led to a significant drop of employment for the miners. The number of employees in iron ore mining dropped from 1,663 in 1954 to 581 in 1955.
In addition to applying new techniques to improve the iron ore quality, extraction was shifted from open-pit mining to underground tunnels. Underground mining enabled extraction of a larger quantity of iron ore that could not be reached by manual digging. Mining tunnels were first dug at 240ML, 247ML, 254ML, 261ML and 268ML (one per 7 metres) in 1953 for the exploitation of iron ore body above 240ML, leading to a small amount of output from underground extraction in 1955. By 1959, MMTC was pessimistic about the reserve but an investigation by Japanese engineers in 1961 confirmed that there existed a deposit of 4.5 million tonnes of iron ore below 240ML. Hence, the plan to construct a tunnel at 110ML was adopted and implemented to reach the extensive iron ore body (Ibid.). This lower-level tunnel, together with some other improvement works of the ore dressing (mineral preparation) facilities was finished in 1963, marking the completion of the mechanisation of the Mine. Before 110ML was officially opened on 17 Oct 1963, iron ore was transported from the 240ML tunnel using motor trucks to the ore dressing (mineral preparation) plant. The construction of 110ML as the transportation tunnel contributed a lot to the reduction of transportation expenses and boosted production.
Nittetsu Mining Corporation established Hong Kong branch office. Ore dressing plant started construction and completed by the end of the year.
Underground tunnels from 240ML to 268ML were completed and iron ores started being extracted from underground.
All extraction went underground.
Prospecting investigation found more iron ores below 240ML and the construction of 110ML transport tunnel facilitated the extraction of the ore body at the lower part.
110ML tunnel was completed, which marked the MOS Iron Mine’s mechanisation and entry into a stable production period.
From stable production to gradual loss of advantages and closing down
Japan’s involvement had boosted productivity of the MOS Iron Mine. Japan imported from Hong Kong about 127,000 tonnes of iron ore in 1963 and the quantity grew steadily to as high as 189,000 tonnes in 1971. However, compared to imports from other countries, the quantity from Hong Kong was meagre. The quantity of iron ore from Hong Kong only constituted a small share of Japan’s total import and the share had kept decreasing since 1963.
The competitive advantage of Hong Kong in terms of its proximity and low cost of labour were also diminishing. The unit price of iron ore imported from Hong Kong to Japan used to be much lower than the overall average price for all iron ore shipped to Japan in the 1950s. However, this gap became smaller and smaller and in 1968, the unit price of Hong Kong’s iron ore exceeded the average price for the first time in the post-war period and this phenomenon became more often in the early 1970s. Hong Kong did not only lose this advantage to other regions in Asia. As the shipbuilding and shipping industries in Japan developed and matured, the search for potential raw materials to meet the demand of its rapid economic growth went beyond Asia. Japan was able to access new larger mines in other continents such as North and Latin Americas and Australia. Those sources supplied cheap raw materials in larger quantity that dwarfed the limited amount of iron ore extracted from MOS.
In the mid-1970s, MMTC faced external and internal challenges. Internationally, demand of iron and steel decreased as a result of the oil crises and abundant supply from mega iron mines in Australia had decreased the price of iron ores. Meanwhile, the demand for iron ore in Japan had also slowed down in the late 1970s and by the end of 1977 there was actually quite a large stock of iron ore left in the shipping yard not utilised for production. Locally, increasing production cost and inflation had all rendered the MOS Iron Mine economically not viable. The Mine had to be closed in 1976.