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What is the correct approach for restoration of tools like this? Is it best to retain the patina of age (this one actually looks pretty good) or try to make it look new again?
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Depends. In concours you will want it looking like new, so check real carefully to see what it looks like it was finished as when new (black paint, phosphated, etc.) and re-do it that way. If not for concours, anything goes, but you'd probably want to at least clean it, removing loose rust and dirt.