Watery Treasure

Cleveland's Cyrus Stephen Eaton takes chances and his plans are large. Once Financier Eaton had almost within his grasp a billion-dollar Midwest empire of steel, iron ore and utilities. The depression tumbled it about his ears in 1931. Eaton picked himself up from the ruins and, at 47, started the long climb back.

Along the way he encountered Steep Rock Iron Mines, Ltd. Steep Rock looked like the kind of big business that Eaton likes. In Ontario, some 70 miles north of the famed Mesabi range, Steep Rock owned fabulously rich iron ore lands with proven reserves of 30 million tons; geophysicists estimated that they might contain as much as 500 million tons, half as rich as Mesabi. The trouble was that the ore lay under Steep Rock Lake and 150 feet of water. Eaton bought control of Steep Rock for an initial cash outlay of only $20,000, and started his big planning to get out the ore.

This week, he proudly announced that Steep Rock had shipped its one-millionth ton of ore this year. Before the close of the Great Lakes shipping season it will send out another 300,000 tons, thus becoming one of the biggest ore producers in North America. On his initial investment, Eaton already has a paper profit of more than $4,250,000.

In with the Cash. The buried wealth of Steep Rock had been known for over 50 years, but no one wanted to supply the capital to get out the ore--until the Canadian owners met Eaton in 1942. He had the daring needed to bring out the buried treasure, and more important in wartime, he knew his way around Washington.

Clevelander Eaton had been one of the first financiers to recognize the shift of power from Wall Street to Washington and he had acted accordingly. In the early days of the New Deal, he was always available to bait Big Business, notably the "eastern bankers" whom he blamed for his downfall in the depression.

This did him no harm when he needed Government cash for Steep Rock. He got a $5,000,000 loan from RFC on his argument that Steep Rock would furnish ore needed for the war. In jigtime, he also got priorities for machinery needed to develop his new ore source. He also knew just the right people, "a few wealthy individuals," who would buy $2 1/4 million in Steep Rock bonds.

Work was started at Steep Rock. The lake was pumped dry of its 121 billion gallons of water. The Seine river, which fed it, was diverted by digging away 2,000,000 cubic yards of earth and rock for a new channel, and by constructing a system of dams and tunnels. The Canadian Government chipped in $5,200,000 for roads, a railway spur, power lines and a dock at Port Arthur to handle the ore. In 1944, a year after work was started, the first ore came out of the open pits.

Cash In. For his services, Eaton and associates got a 10% commission on the bonds and 2,000,000 shares of Steep Rock stock from the company at 1-c- per share (it was then selling for close to $1). He then trussed up Steep Rock to a ten-year contract to sell all its ore to Premium Iron Ores, Ltd. Premium in turn purchased 800,000 shares of Steep Rock at $2.50 a share to provide working capital.

Premium Iron was Cyrus Eaton under another name; he owned 74.4% of it, and his good friend, Otis & Co.'s President William Raymond Daley, owned the rest. The contract gave Premium 2% on all Steep Rock sales. Salesman Eaton then got the Cleveland Cliffs Iron Co., on whose board he sits, to agree to buy all the ore that Steep Rock could produce and Premium Iron could sell.

With Steep Rock grossing upwards of $8,000,000 a year, Eaton has no intention of cashing in his paper profits. He now plans to open up four more open-pit mines, boost output to 5,000,000 tons in a few years. The Mesabi range is approaching exhaustion and Eaton is sure that he can sell all the ore he can mine for years to come.

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