PORTRAIT OF ONE OF CANADA’S AMERICAN OWNERS

TERENCE ROBERTSON December 15 1962

PORTRAIT OF ONE OF CANADA’S AMERICAN OWNERS

TERENCE ROBERTSON December 15 1962

PORTRAIT OF ONE OF CANADA’S AMERICAN OWNERS

John C. Doyle of New York owns an iron-mining enterprise that will take two billion dollars out of Canadian soil. This is the tangled story of how he got it, how he keeps it, and how he spends the profits

TERENCE ROBERTSON

IF CANADA NEEDS to own and develop her natural resources to remain economically independent then we may as well face the unpleasant fact that we have just lost the richest iron ore deposits in North America. The man who has captured them is John Christopher Doyle, a forty-sevenyear-old Irish-American from New York who is making over the Labrador wilderness into one of the largest mining empires in the world.

Doyle is an ex-coal salesman; he has now acquired control of mineral and timber rights covering twenty-four thousand square miles of Newfoundland and Labrador in a series of complicated deals with Premier Joey Smallwood. The deals began in 1952 with a down payment of $2,500, and now three fabulously rich ore bodies are opening up in Doyle’s private kingdom in return for promises by American steel companies to pay Doyle’s holding company, Canadian Javelin, well over a billion dollars in royalties during the next fifty years.

Through Doyle’s salesmanship, the ten major international steel companies which comprise the Wabush Mines Group — eight of them foreign owned and based — have started to dig into a five-square-mile trough of land at Wabush Lake, eight hundred miles north of St. John’s. It contains an estimated one and a half billion tons of ore which will still be coming out of the ground

in the year 2055. This is just the beginning. Doyle also owns two ore deposits adjoining Wabush Lake known as Julian and Jubilee, which together contain another billion tons of ore. He proposes that Javelin, a promoting company which he personally controls by owning at least a third of the stock, should mine these properties itself. Javelin's profits from digging this ore will hit at least another billion dollars, if engineering estimates are accurate.

It has taken Doyle just ten years to make himself master of this incredibly rich piece of Canada, and now he can be accused of committing only a single demonstrable sin — that of doing, in 1952, what no Canadian could or would do: invest in the potential wealth of Labrador’s then-unsurveyed resources.

The exploration and mineral rights now held by Doyle were available for many years from NALCO (Newfoundland and Labrador Corporation), a Crown agency set up by the Newfoundland government to dispose of mineral leases. Doyle picked up the rights because he guessed they might make him rich. Then he undertook extensive geological and aerial surveys that established the existence of iron ore deposits.

To protect his leases Doyle undertook to spend :.t least a million dollars on development of the properties over the first three years, and later

bought control of NALCO in a deal by which the Newfoundland government received $2 million cash. Doyle will receive a royalty payment of $1 for every ton of ore taken from the Wabush Mines property.

In fact, through Canadian Javelin Doyle spent nearly $6 million in Labrador by 1957 — and still no Canadian company would join him. By then the U. S. steel industry, hungry for convenient and easy-to-mine ore. was beginning to show an interest in what this intruder into their club had to offer.

MEMBERSHIP FEE: A SLICE OF CANADA

That was the beginning of the Wabush Mines Group. Doyle is no longer an intruder but a fully accepted member of the international steel club — only because he owned a slice of Canada that the LJ. S. steel industry, which was running out of ore at home, desperately needed.

Wabush Mines is spending an initial $250 million dollars to build a city for five thousand workers and their families at Wabush Lake. It has laid railway spurs linking the Javelin properties, and constructed loading facilities at Point Noire on the St. Lawrence. Power for the mines is already being generated by a plant constructed at Twin Falls, on the Unknown River.

Wabush’s escalating production schedule for

the first fifty years of its ninety-nine-year lease means that royalties which began at $450,000 in 1961 will climb to a peak of $15 million a year by 1972. It is unlikely that Doyle will live to see the final royalty payment made to Javelin.

In addition to Doyle’s dollar-a-ton royalty, Wabush will pay twenty-two cents to the Newfoundland government, which means that the province will receive about $250 million in the next fifty years from the Wabush property alone. For the next few years at least, most of Javelin’s (meaning Doyle's) royalties will remain in Canada to finance Javelin's own mining operations at Julian and Jubilee. Doyle is investing in another township for twenty-five hundred workers; building a special plant to concentrate ore and enrich its iron content and building a blast furnace for the production of pig iron.

Wabush Mines, Javelin and the British Newfoundland Company are to share the cost of an additional electric power plant at Hamilton Falls on the northern edge of Wabush Lake. When this is complete Doyle proposes to build a directreduction steel mill at the Julian mines.

In fairness to Doyle and the Wabush Mines Group 1 should point out that while they will ultimately take billions out of C anada, they have put millions into their properties already and will invest much more.

CONTINUED ON PAGE 50

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John C. Doyle is landlord of 24,000 square miles of Canada

When the Julian and Jubilee mines begin production, Newfoundland will receive an additional two million dollars a year in royalties, the federal government will take its share in taxes, and seventy-five hundred new jobs will have been created for the men of Newfoundland and Quebec.

Some forty million cords of high grade timber worth $170,000,000 grow in Doyle's kingdom and he has told me: "I certainly intend to do something about it. Friends in the Canadian pulp and paper business have been telling me that this timber will be too expensive to cut because of distance and climate. I'll prove they’re wrong.”

This, then, is the house that Doyle built — twenty-four thousand square miles with 2.5 billion tons of iron ore and a fortune in timber. He is the landlord and the tenants are five U. S. steel companies, two German, one Italian. Canada is represented only by the Steel Company of Canada and Dominion Foundries and Steel Ltd. Their combined interest is about twenty-three percent of the Wabush Mines Group which is operating on only one of Doyle’s three properties.

The most fundamental issue facing Canadians today is foreign ownership of this country’s natural resources. Should our natural wealth be drained away to fatten shareholders who don’t even know where or what Canada is? Or is it true that without foreign investment we could hardly survive as a nation, let alone develop?

The story of John Doyle brings together in one man a case history for both sides. It is true that if he chose he could retire right now with more money than he could possibly spend coming in from his share of the annual royalties going to Javelin. However, that is not his plan. Instead he says he will reinvest in Canada. Yet the fact that he has this choice should be warning enough for all Canadians that not only corporations but individuals can come to Canada from anywhere, gain title to our minerals, and sell sizable chunks of our future to the highest bidder. That is the extent of our insecurity, but some experts maintain we can’t afford to have it any other way.

“John Doyle,” a senior official of the Toronto Stock Exchange told me, “is a minemaker. Without him it is likely that the Labrador iron would still be lying in the ground untouched.” This official had allowed his enthusiasm to blur his memory. The American-owned Iron Ore Company of Canada had actually started operations in Labrador two years before Doyle arrived.

In mining and investment circles this is tantamount to outright approval for the relentless, single-minded manner in which Doyle has pursued his objective. Yet only a few years ago Canadian brokers were warning would-be investors that Doyle was promoting unproven properties, that he had no intention of digging down to prove his

claims and that Javelin was probably worthless stock.

Doyle was giving them good reason for caution by such methods of raising money as selling unregistered stock over the counter. These have led to entanglements with the Canadian Stock Exchange and the U. S. Security and Exchange Commission.

Now that Doyle’s package has proved to be one of the most important mining discoveries in recent years, whatever shenanigans the investment men suspected him guilty of in the past seem to be forgotten and forgiven. Instead, the mining communities of Toronto and Montreal show an almost indecent eagerness to confer upon Doyle the accolade of creative minemaker.

A Toronto promoter said, “When a guy comes along and starts promoting properties he has no intention of developing, he’s a thief. But if he has a clear development objective then he’s what we call a minemaker. That’s Doyle. He had an objective all the time although a lot of us couldn’t believe it. His agents were manipulating stock like crazy all over the place and few people could see where he was going. But results count—and he’s certainly got results.”

His feet on a $12,000 desk

Doyle, a graduate in science from the University of Chicago and subsequently a student at the Illinois Institute of Technology, has been promoting all his life, and always with an objective. As a $125-a-month coal salesman he once persuaded a U. S. coal producer to build a new section of coal wharves in Chicago and then promoted a deal in which he sold a million tons of coal to CNR and CPR through Boon-Strachan, the Montreal coal brokers. Before the war he lied about his age to obtain a reserve commission with the U. S. Army engineers and when the fighting began he promoted himself to ADC to two generals in succession. In 1946 he promoted a U. S. - Canadian syndicate into taking over the Montreal coal firm, Boon-Strachan, from its aging owners and making him president in their place. Then he promoted deals with Luscar Mines and Forestburg Colliery in Alberta which gave BoonStrachan a sales volume of three million tons of coal a year—ten percent of all the coal then being sold in Canada.

Doyle’s personal life is no less spectacular. Tall, youthful-looking and heavily built, he gives the impression of power without arrogance, of confidence in a wary sort of way. Unexpectedly for a self-promoted millionaire with roots in Chicago’s south side, he is soft-spoken, articulate and deeply involved in many forms of art.

He likes fine things around him but seems to identify quality with flamboyance. His particular passion is for antique furniture of Louis Quinze vintage. which he imports from France. And a strong sense of décor has convinced him that he should be his own decorator for his homes and offices in New York, the Bahamas and St. John’s. Newfoundland.

Javelin’s head office at St. John’s is filled with maple furniture and Canadiana: the executive offices in New York are a fair replica of a Hollywood

set for a period film. Doyle r feet on a gilt-edged Louis Quinz worth about twelve thousand dollars, while his receptionist works at an inlaid table of the same era worth eight thousand.

Although Doyle still shows the muscular build of an athlete, his extra poundage is due, I suspect, to an obsession with gourmet food and fine wines. In a New York restaurant recently, there were six in a group that included Doyle and fine old wines flowed freely. The bill reached $280.

With a home in Nassau, an apartment in New York and most of his major business activities in Canada, Doyle has applied for British citizenship. He doesn’t mind being accused of wanting to live in the Bahamas for tax reasons, because “I’ve fought hard enough for it in my life and in any event I’ll be paying corporate taxes in Canada.”

His only other interests are mines worth two million dollars in Chile, some property in El Salvador, and a luxury hotel in Panama which “I got for a song because its previous owners were in trouble and wanted out.” The hotel is managed by Hilton Hotels but once he became the owner Doyle told Conrad Hilton precisely how it should be run. He also insis*ed upon redecorating every room himself and because he is an accomplished organist who loves the instrument, he bought the largest ever made in the U. S. — a 30-rank Wurlitzer — and installed it in the hotel’s cocktail bar.

Doyle commutes between Canada. New York, Nassau and Panama in an ornately furnished DC-6 private aircraft. To critics of this seeming selfindulgence he replies, “I haven't the time to hang around airports waiting for commercial flights.” In any case, he says, the aircraft paid for itself in one day a few years ago when Cana dian Javelin was one of three companies bidding for exploration rights in a remote section of Labrador. Premier Joey Smallwood of Newfoundland had summoned representatives of the competing firms to St. John’s to make the final deal. They arrived over the provincial capital about the same time, Doyle in his big four-engined plane, his competitors in two twinengined aircraft. St. John’s was fogbound and all three aircraft had to circle until the weather cleared.

Eventually the two smaller planes were forced by lack of fuel to head for Sydney, N.S., and while they were away the fog cleared sufficiently to allow Doyle to land. By the time his competitors got back to St. John's, Canadian Javelin had signed an agreement with the Newfoundland government for a railroad to the property now called the Julian ore body. Doyle believes that by doing the construction itself, Javelin saved $4 million in costs. The DC-6 cost less than $250,000.

Doyle’s legal troubles are never dull, never simple and never-ending. A Montreal lawyer who was once involved in a typical Doyle suit said: “Up until 1957 no one really knew what he had in Labrador. He talked about millions of tons of iron ore and other promoters called him a crazy mixed-up kid. Then he persuaded the big boys from the States to go see for themselves, to study his survey reports. Suddenly he found that he

was being described as a boy wonder.”

It was then that persistent efforts began to have Doyle ousted from Javelin. Doyle battled such shadowy opponents as the legal advisers to rival mining groups, and antagonistic shareholders who never appeared but always acted through proxies. At times these actions dominated the Montreal courts.

He has been in trouble with U. S. and Quebec security exchange commissions since 1958 when Javelin stock was barred from over-the-counter trading in the U. S. The stock had not been registered with the commission as required by law and there was a suspicion of illegal over-the-counter trading. When Doyle undertook to reveal the value of his ore bodies and to comply with SEC rules, the ban was lifted.

Doyle is not afraid of the limelight but when he chooses to be inconspicuous he can do it well; few' people, even in Newfoundland, know that he made a personal donation of $500,000 for buildings at the Memorial University of Newfoundland at a time when his company could barely raise that sort of money for development of its Labrador properties.

Doyle’s entry into the U. S. race for Canada’s hidden resources w'as neither deliberate nor dramatic. In was accidental. In late 1951, Boon-Strachan, Doyle's Canadian coal distributing company, was doing well and he had bought the near-derelict Javelin Foundries and Machine Works at Joliette to manufacture a new type of coalburning stove and such cooking utensils as frying pans. He presided, in fact, over a neat, uncomplicated operation, comfortably aware that he had made his first million. He liked Quebec and spoke French fluently.

The only bleak prospect in sight was the $17,000 owed him by his NewToundland distributor who seemed to be in financial trouble. Doyle decided to fly to St. John’s to negotiate a settlement. During the flight he sat beside a man who introduced himself as Claude Howse a government geologist.

Howse spoke of the possibilities of Labrador iron ore so enthusiastically that Doyle agreed to meet experts of the mines department for more detailed talks. What attracted him was that anyone who w'ould gamble on the development of mineral properties would receive generous exploration rights from the province. Before leaving the aircraft Doyle had a final question. “How about Labrador?” he asked. “Has it all gone?”

"No," Howse said, and told Doyle that if he w'as seriously interested he should meet Dr. Valdmanis, chairman of the Newfoundland and Labrador Development Corporation.

What Doyle could not know then w'as that he had stumbled into the start of an immense iron ore rush triggered by the U. S. steel industry. Only a year before the Americanowned Iron Ore Company of Canada had started operations at Knob Lake in Labrador. Doyle, second on the scene, was in neither the iron nor the steel business and represented no one but himself. Nor could he have known that Alfred A. Valdmanis, the so-called economics genius chosen by Smallwood to put Newfoundland on the industrial map. would be merely the

first of an odd assortment of characters with w'hom he would become inextricably involved.

It took Doyle a week to study survey maps of Labrador; then he signed an option to lease two concessions totaling about 5,000 square miles. He paid NALCO $2,500 to bind an agreement calling for an initial payment of $789,000, and returned to Montreal and laid the foundations for his present empire by converting his Javelin iron stove company into a holding company for mineral leases. Soon Javelin was listed on the Canadian Stock Exchange. When the company failed to produce information required by the exchange w'ithin a specified period, it was delisted.

A year later the NALCO agreement was revised to include a more comprehensive lease which granted Javelin “exclusive rights to explore, develop, produce, extract and remove all minerals, both metallic and nonmetallic . . .”

This final version, the agreement upon which Javelin is corporately based, was signed by Smallwood because Valdmanis was no longer chairman of NALCO. He was by then serving a four-year jail sentence for swindling the Newfoundland government out of $200,000 — a scandal that nearly toppled Smallwood's regime.

The Iron Ore Company at this time was preparing to produce ordinary low' grade ore in Labrador and ship it direct to the U. S., an expensive business which had turned other steel interests away from Labrador. But Doyle conceived a revolutionary idea based upon the following principles;

■ World steel consumption is rising at an accelerated rate. Steelmakers depend upon a constant flow of iron—scrap and ore.

■ As the quality of steel improves it becomes more durable and there is less scrap. Mounting labor and shipping costs make underground mining prohibitively expensive.

■ Steel industries everywhere have launched a world-wide search for accessible, open-pit minable ore with the highest possible iron content.

■ The two countries with the best development potential for ore are Brazil and Canada. While Brazilian law forbids foreign control of natural resources, Canadian law invites it. and even provides for generous tax relief. The first three years of production are free from tax liability and one third of the ore produced can be written off every year for depletion.

■ The Labrador iron trough is suitable for open-pit mining but the iron content of the ore is low. Steel companies require a high iron content because impurities waste shipping space.

■ The solution: to build concentrating plants on the mine sites, remove impurities from the ore and virtually double the iron content and the value of the ore that's shipped.

I asked Doyle why American steel men had not already thought of this. He said, “The U. S. steel industry has been a club for so long it has forgotten how to keep up with the times. Steel plants in Europe which have been built since the war arc far in advance of many in the U. S. So is their thinking and so are the methods they use. As an outsider 1 was not

blinded by the restrictive traditions of the U. S. industry.”

Doyle then faced another problem. More than eighty percent of all ore consumed by steel companies comes from captive mines. In other words the steel industry likes to control its sources of supply, which usually leaves an independent mine-owner only one choice—to sell out to a steel company or build his own steel mills.

In 1954 Doyle was a lease-holder, not an owner; there was little likeli-

hood of his being able to afford the huge investment required to get into the steel business. Moreover, he was spending in excess of a million dollars a year on exploration. He hired a Canadian stock and bond sales expert named Robert Maurice Sherwood to advise Javelin on the mechanics of raising money by issuing stock.

“That was my worst mistake,” says Doyle. “Within three years we were engaged in a stock fight for control of the company.” In fact, the two men

have been fighting each other in a long series of stock disputes which are still unsettled.

These were stormy years for Javelin. Sherwood left, challenged Doyle's control of the company. The business of piecing an empire together on the one hand and keeping himself in the Javelin saddle on the other kept Doyle on the move from boardroom, to courtroom, back to boardroom.

Nor were his personal affairs on too even a keel. His wife, who had

two children by a previous marriage, gave birth to a third child while Doyle was deeply involved in legal and business activities. The marriage deteriorated and ended in divorce. Doyle adopted his stepchildren and found himself alone with two daughters and a son. He married for a second time.

“At this point I made a second mistake,” he admitted ruefully. “I placed a large block of Javelin shares in trust for my children. Not long afterward my second wife left me. Next thing I knew the trust shares in her possession had been thrown in with the opposition in an attempt to vote me out.” (Doyle has since married for the third time.)

Subsequent legal actions — eight were brought against Doyle between 1958-60—were shrouded in mystery as they bounced back and forth between courts in New York and Montreal. Financial experts in both cities wondered at the astronomical figures hurled between batteries of counsel arguing allegations of mismanagement and mishandling of shares. The fragile structure of Javelin was quivering alarmingly when Pickands Mather, one of the largest firms of mine and steel management consultants in the U. S., approached Doyle with an offer to buy him out.

Doyle, lacking funds and beset by Sherwood, who had by then moved to Geneva, Switzerland, was only too willing to hand over control. It seemed that he had at last promoted something that was too big for him. Yet the offer did indicate that U. S. steel interests had awakened to the potential of Labrador if Doyle’s idea for onsite concentration of ore was used.

News of the pending sale reached Sherwood who immediately intervened from Geneva to have an injunction issued against Doyle forbidding him to sell his shareholdings. Pickands Mather abandoned their offer but hinted they would be willing to form a syndicate to mine Doyle's land on a royalty basis.

At this point, one James Scotland Benning of Montreal petitioned the secretary of state of Canada to investigate the disposition of Javelin shares at the Swiss bank. His case stemmed from the purchase in 1955 of $4,800,000 worth of Javelin stock by the bank acting for European clients. Benning now claimed to be an interested shareholder who simply wanted to know how the money was being spent.

Doyle's attorneys replied that Benning was Sherwood’s brother-in-law, that he was holding some of Sherwood’s shares in trust for his wife and her sister, and that he was really acting on Sherwood’s instructions. Two months later Doyle and Sherwood reached a settlement in which Sherwood received 520,000 shares in return for a written undertaking to stay out of Javelin’s affairs. At the same time Benning withdrew his petition.

The uneasy truce lasted until late in 1959 when Doyle suddenly began an action against Sherwood alleging fraud. Some 423,000 of the settlement shares were seized on orders from a Montreal judge. Benning brought countercharges of fraud against Doyle and began an action which focussed the attention of all Canada on Javelin's troubles.

The case began one morning in

February. I960, when the unsuspecting Doyle landed at Montreal in his private aircraft, and checked in at the Queen Elizabeth Hotel. The following evening detectives arrested him on a warrant sworn by Benning, alleging fraud, conspiracy and theft. Doyle spent that night in jail while his lawyers fought to have him released on bail. They succeeded, but bail was set at $ I ()(),()()() because, it was said. Doyle might use his aircraft to leave the court’s jurisdiction.

When the preliminary hearing opened before Judge Redmond Roche the suit against Doyle alleged that he had received money from the Swiss bank but had not spent it on his Labrador properties as intended. Benning charged that Doyle really sold the shares somewhere in Europe and put the money into a secret bank account. This w'as really the same charge that had been made a year before in New York. The U. S. Securities and Exchange Commission had investigated

without finding evidence to support it. On the other hand there was photographic evidence showing that Doyle w'as developing the Wabush and Julian properties.

When Benning took the stand Doyle’s lawyers attacked on surprising grounds: they used the Canadian spy trials of 1946. From the report of the royal commission that investigated Soviet espionage in Canada, the lawyers produced the fabric of a strange coincidence. Benning, aged

fifty, slight and mild mannered, had been named by Igor Gouzenko as a Soviet agent planted in the Munitions Board at Ottawa by another agent. Samuel Gerson. w'ho was assistant head of the War Production Control Board. The lawyers injected a sinister note by quoting a telegram sent to Moscow' in 1945 by Colonel Zabotin, then military attache at the Soviet Embassy in Ottawa, in w'hich he said that Gerson “states that Canada is entering a boom period in the mining industry and it is therefore likely that within tw'o years the office w'ill be in a position of work at the old place."

In evidence before the commission, Benning had admitted that Gerson w'as his brother-in-law, as their wives were sisters. As the cross-examination of his past continued, Benning further admitted that the wives were, in fact. Sherwood’s sisters and that the information on which he had sworn out the warrant for Doyle’s arrest had been supplied by Sherwood from Geneva.

In his own defense, Benning pointed out that although he had been sentenced to five years for espionage, the Ontario Court of Appeals had quashed the conviction on grounds of insufficient evidence.

Judge Roche, after hearing a month of wrangling, dismissed the charges against Doyle in a judgment which said: “Furthermore, this court . . . expresses serious doubts as to the motives of the complainant . . ."

The verdict accepted, in fact. Doyle’s defense that Sherwood was trying to drive down the price of Javelin's stock, discredit Doyle as president of the company, and then take control himself.

Despite these legal gefutiles, the opening of the St. Lawrence Seaway in 1959 created a surge of interest among U. S. steel companies who could foresee lower shipping costs from Seven Islands. Pickands Mather were able to form the Wabush Mines Group to develop Javelin's Wabush property. At the same time Doyle went back to Newfoundland to negotiate a new' agreement with Smallwood in which Javelin and the Wabush companies took control ot NALC’O.

Under this arrangement Wabush Mines received a fifty-one percent interest in NALCO, divided between its ten companies; Javelin received 39.4 percent and the remaining 9.6 percent of stock was distributed to outside companies. Through his control ol Javelin Doyle, therefore, has the largest holding in the C’row'n corporation which owns the leases to everything encompassed in 24,000 square miles of Labrador and Newfoundland.

What Doyle has really achieved is a mass invasion of foreign steel combines into C anada to take control ol choice deposits in the 750-milc Quebec-Labrador iron trough. It might be said that at present there arc really four major contestants for the wealth of Labrador's iron trough—Iron Ore Company of Canada, which is registered in Delaware: Quebec Cartier Mining Company, a subsidiary ot U. S. Steel: the Wabush Mines Group, which is U. S. dominated; and Canadian Javelin, which is registered in Canada but controlled and operated by John C. Doyle of New York and Nassau, as we have seen. ★