Most or a large portion of the trade that now falls to its share comes from the southern portion of the British North Borneo Company's territories, from which it is distant, at the nearest point, only about six miles, and the most reasonable solution of the Labuan question would certainly appear to be the proclamation of a British Protectorate over North Borneo, to which, under proper guarantees, might be assigned the task of carrying on the government of Labuan, a task which it could easily and economically undertake, having a sufficiently well organised staff ready to hand.[13] By the Royal Charter it is already provided that the appointment of the Company's Governor in Borneo is subject to the sanction of Her Majesty's Secretary of State, and the two Officers hitherto selected have been Colonial servants, whose service have been _lent_ by the Colonial Office to the Company. The Census taken in 1881 gives the total population of Labuan as 5,995, but it has probably decreased considerably since that time. The number of Chinese supposed to be settled there is about 300 or 400--traders, shopkeepers, coolies and sago-washers; the preparation of sago flour from the raw sago, or _lamuntah_, brought in from the mainland by the natives, being the principal industry of the island and employing three or four factories, in which no machinery is used. All the traders are only agents of Singapore firms and are in a small way of business. There is no European firm, or shop, in the island. Coal of good quality for raising steam is plentiful, especially at the North end of the island, and very sanguine expectations of the successful working of these coal measures were for a long time entertained, but have hitherto not been realised. The Eastern Archipelago Company, with an ambitious title but too modest an exchequer, first attempted to open the mines soon after the British occupation, but failed, and has been succeeded by three others, all I believe Scotch, the last one stopping operations in 1878. The cause of failure seems to have been the same in each case--insufficient capital, local mismanagement, difficulty in obtaining labour. In a country with a rainfall of perhaps over 120 inches a year, water was naturally another difficulty in the deep workings, but this might have been very easily overcome had the Companies been in a position to purchase sufficiently powerful pumping engines. There were three workable seams of coal, one of them, I think, twelve feet in thickness; the quality of the coal, though inferior to Welsh, was superior to Australian, and well reported on by the engineers of many steamers which had tried it; the vessels of the China squadron and the numerous steamers engaged in the Far East offered a ready market for the coal.