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6. I am happy, however, to be in a position at the present time to inform your Excellency that the difficulties which have hitherto checked my efforts, have been surmounted and that within a month after the receipt of a favourable reply to this letter I shall be prepared to send out to the Colony the first ship of the New Zealand Inter-Colonial and Inter-Provincial Steam Navigation Company.

7. The Company proposes to put on two steamers, each of them being not less than 800 tons burden and 200 horse power, to run monthly between New Zealand and Australia; these boats would meet the European steamers bringing the English mails and would convey them direct to the seat of Government in New Zealand, wherever that may be, and return again to Australia in time to put the mails on board the homeward bound mail steamer. The Company will engage, under penalties as may subsequently be agreed on, that their mail steamer shall sail from either port within 12 hours after the mails are put on board, unless prevented by stress of weather or an unavoidable breakdown of machinery.

8. The Company proposes also to put on two other steamers, each of them being not less than 400 tons burden and 100 horse power, to meet their mail steamer on her arrival from Australia, and to carry the mails both English and Provincial to the various Provinces of New Zealand, returning from each trip in time to put the Provincial mails on board their Inter-Colonial steamer before she sails for Australia. It is not possible at present to mark the exact course of each steamer as this must depend somewhat upon the seat of Government in New Zealand, but I may state that it is the intention of the Company to give service to each Province of the Colony, and to make Auckland and Wellington the ports to and from which the Inter-Colonial steamers would run.

9. There would be, therefore, two steamers of not less than 800 tons each and 200 horse power, running between New Zealand and Australia, and these would be constantly employed in the Inter-Colonial service, and there also would be two steamers of not less than 400 tons each, and 100 horse power, running up and down the coast of New Zealand, and these would be solely engaged in the Inter-Colonial service.

10. Your Excellency is of course aware that steamers cannot be employed with any satisfactory result to their owners unless they receive a subsidy for carrying the Mails. And the express object of this letter is to ascertain the views of your Excellency’s government upon this important question. I must be allowed to state frankly that a subsidy guaranteed for a certain number of years by the New Zealand Government is absolutely requisite for the establishment and support of an efficient Steam Service, and I trust that the proposition which I am about to make on this subject, will obtain the consent and approval of your Excellency’s Government.

11. The Company would propose to carry out the whole Steam service both Inter-colonial and Inter-provincial for one subsidy, to be paid by the General Government of the Colony, leaving the Provinces to arrange their quota of the expenses with the General Government. This would be far more convenient and satisfactory than to have one contract with the General Government for the delivery of the English Mails at some place in New Zealand, and another contract with the Provincial authorities for delivering the Mails at the respective Provinces of the Colony.

12. The amount of subsidy which would be required for the performance of the whole service would be Twenty Thousand Pounds (£20,000) per annum, and it would be requisite that this sum should be guaranteed for at least five years. And I trust that Your Excellency’s Government will consider this a reasonable amount taking into consideration the nature of the services to be performed. I feel bound to add that a less sum would not be sufficient for the purposes of the Company which I propose to establish.

13. I am aware that a proposition has been or is about to be made to your Excellency by the Directors of the West India Royal Mail Steam Packet Company, who are endeavouring to establish an Australian Mail Service, via Panama, to drop the English Mails at Auckland on their way to Australia and to call for the home Mails on the return of the steamer to Panama. It is at present considered very doubtful whether they will be in a position to carry out their wishes at all, but should such prove to be the case, I submit to your Excellency that their steam service, if accepted, will confer but very inadequate advantages upon the Colony of New Zealand. They contemplate merely a delivery of the English Mails at Auckland. The company with which I am concerned proposes not only to carry the Mails but also to provide accommodation for the passengers and mercantile traffic of the whole Colony, and other beneficial results will accrue to the colonists if the terms which I now have the honour to submit to your Excellency be accepted.

14. Your Excellency is aware that the fuel at present used for domestic purposes throughout the whole of New Zealand is wood. Every year it exists in less quantity near the towns, and has to be brought further from the interior of the country. During the winter season, particularly, owing to the state of the roads, it is scarce and dear. It is at all times an expensive fuel. When I was in New Zealand, my attention was particularly directed to this subject, and I devoted several weeks to the exploration of the coal fields and the discovery of a good quality of coal. I was very successful in my investigations, and since my return to England I have submitted the specimens which I brought home with me to the analysis of a gentleman who has recently returned from Borneo, where he had been specially engaged by His Excellency Sir James Brooke to superintend the opening act and the working of the coal fields at Labuan. I mention this circumstance to show that I speak from good authority. This gentleman assures me that the specimens of coals upon which I have requested his opinion are of a very superior quality, and would, if properly worked, become a valuable source of wealth to the Colony.