the ore in the famous Anaconda Mine, previously mentioned (page 44). The
locator's discovery was upon an outcrop rich in silver. Probably the
original compounds of the vein were of both silver and copper. The
silver was more stable against dissolution than was the copper, with the
result that the base metal was removed more rapidly and completely than
was the precious metal. The upper portion of the vein was therefore left
rich in silver, and low in copper. But, as depth of mining increased,
there was found a gradual diminution of the silver content with a
simultaneous increase in the copper. The mines of Butte have become
known as copper mines, and the wonderful records they have made are
ample testimony to the fact that the change in the prevailing metallic
values has not wrought serious havoc in the mining industry of the
district.
Regarding the probability of veins persisting to great depths, there is
this thought suggested by J. E. Spurr: "Owing to the pressure exerted by
gravity, it is doubtless more difficult for a fissure to stay open in
depth than near the surface. The tendency is to press the sides
together. At a certain depth, it is probably the case that the pressure
and the plasticity resulting from this, together with the increase in
heat, makes it impossible for fissures, fractures or any openings to
exist."
There are still many persons who are reluctant to let go of the
cherished notion about the improvement of ores with depth. But there is
no economy in deceiving one's self, and the wise thing to do is to
accept the truths as they are daily proven. It may be worth while to
again refer to the wonderful Camp Bird Mine. This mine was discovered
in its true worth years after it had been abandoned by early prospectors
because it lacked showy, base-metal minerals. However, since its true
merit has been recognized, it has maintained large and remarkably rich
annual outputs. As values were beginning to show a material decrease,
about five years ago, an experienced mining engineer of recognized
standing was engaged to give advice concerning the future exploitation
of the property. After exhaustive investigation of the ground, and in
the face of adverse opinions, he recommended the discontinuance of
further development in depth. At the same time, however, he advised the
exploitation of the ground laterally or along the strike of the very
persistent vein. His advice was followed and the company's stockholders
had reason to be advocates of the new theory; for a very reasonable
amount of horizontal development work opened up vast stores of rich gold
ore.
And yet, notwithstanding this disquieting feature that seems to apply to
mining, there is comfort to be found in the consideration of the
exceptional cases. Every man may hope that when he locates a new mine he
is taking possession of a property that will have as extensive ore
bodies as those that have been proven to exist in the lead-silver mines
of Laurium, Greece, the quicksilver mines of Spain, or the copper and
tin mines of Cornwall. These mines are in lodes which have persisted and
have been mineralized to comparatively great depths, so that their
bottoms have not been reached.
There is a modern idea that has taken root in the minds of mining men of
the last generation to the effect that the mines with rich ore are not
necessarily the ones with big profits. There are many men looking for
investments in mines whose contents are of low grade but in large bodies
readily worked. If a mine with rich ore can be found and the ore abounds
in such liberal amounts as to warrant the inauguration of a company with
the essential working equipment, such a proposition will naturally not
be turned down. However, the faith of some men is placed in those mines
that may be operated upon very large scales for long periods even if the
profit per ton be very small. With a large plant, the unit of expense,
_i.e._, the cost of mining per ton, is less than with a small mine. With
the assurance of regular outputs of ore of a reasonably uniform grade,
the milling equipment can be planned to handle a mine's product to the
greatest advantage. The Alaska-Treadwell Mine, on Douglas Island, is an
instance of a splendid property that has been continuously operated for
about a third of a century. The ore is low grade in gold but immense
dividends have been declared because the ore body, a tremendous mass of
eruptive rock, has lain in such a position that the owners found it
possible to excavate the stuff, to a great extent, by open-pit methods,
although not by using steam shovels. The ore is treated in a vast mill
contiguous to the mine.
The Homestake, another gold mine, has an ore body quite dissimilar
geologically from, but of dimensions approximating those of, the
Treadwell. It is a great body of mineralized, crushed shales, standing
steeply in the shape of a lode and carrying about $3.75 per ton. It has
been followed down considerably over one thousand feet and although the
grade has dropped somewhat with depth, there are known to still be
millions of tons in reserve. According to estimates, the mine has enough
positive ore in reserve to keep the mill running at the rate of 4,000
tons per day for several years even if no more ore were to be opened up.
This ore nets but 53 cents per ton above all mining and milling
expenses; but a little arithmetic will show that this mine is worth
twice as much as the mine that is producing, with more or less
regularity, an average daily output of, say, forty tons of high grade
ore upon which there is a net gain of $25 per ton, a figure that is
rather high for the average of so-called "high grade" mines.
We must, therefore, decide that it is always wise to think twice before
condemning a mine because its grade of product is low. It is only
recently and by virtue of marked improvements in metallurgical
processes that many bodies of mineral have become "ore." Hence it is but
natural that many of the older miners fail to grasp the possibilities
that lie in such deposits.
What is the line of value separating a low grade from a high grade of
precious metal ore? There is no uniform practice along this line. One
will notice that ores are nowadays spoken of as high grade that, before
the practice of mining these described meagre deposits, were reckoned as
low grade. This fact is due to two reasons, viz., the cheapening of
metallurgical operations, and the greater respect that is entertained
for ores of low metallic content. The Esperanza Mine, in Mexico, is
called a high-grade gold mine. Its ore has averaged about $33 per ton
and the profit therefrom about $19. The Oroya-Brownhill Mine, in western
Australia, has had ore that carried a value of about $22 per ton and
from it a profit of about $15 per ton was made. In the Cripple Creek
District, ores that run above $30 per ton are considered high grade.
This means that the average rich ore shipments of the district have a
gold content of about 1-1/2 ounces per ton. The expenses of mining,
freight, and treatment will probably total close to one-half the gross
value, or about $15 per ton.
When one speaks of $30 or $40 ore as rich or high grade, it is not to be
inferred that there is no ore in the shipments which is not worth a
great deal more than this amount per ton. Such lots of ore will, no
doubt, contain a great many chunks that would assay many times the
average value. Such selected materials would not, however, be samples;
they would be what are called "specimens." The specimen has its place in
mine economic discussions because it furnishes the basis of operations
for the ubiquitous "high grader" with which nearly every new and rich
mining camp must contend.
Some writers claim that the high grader is a product of modern
conditions; but we find that he has existed for such a long time that he
was given mention by the Scotch historian and scientist Andrew Ure, who
wrote of the precautions that were exercised in working the graphite
mines of England, a century ago, to prevent the pilfering of even this
comparatively low-grade material. Even the ignorant African natives of
today cannot be trusted to wear clothing while working in the diamond
mines. No, the cause of high grading is the innate greed of human beings
and it has existed from prehistoric time and among all peoples.
In this discussion as to grades of ore, the question may arise as to
what might be reasonably considered the most attractive kind of a mining
proposition. This is too knotty a query to be answered in a few words.
There are so many different phases that must be given due weight. Every
mine is a problem in itself. The Minnesota mines afford the best
examples of profitable iron mining. Under the classification of
underground, tabular deposits such as veins or lodes, no matter in what
metals their values are found, Mr. T. A. Rickard believes that the ideal
mine would be one carrying ore worth $10 per ton, in a body five feet
thick, with costs not exceeding $5 per ton, and so mined as to keep one
million tons continually in reserve. According to these restrictions, he
thinks the Robinson Mine, of Johannesburg, will about fill the bill as
an ideal _gold_ mine. It has a deposit of about the right thickness to
avoid excessive timbering expense and this ore body is in such a vast,
continuous sheet that its superintendent can depend upon maintaining a
systematic development that will assure a constant supply of ore to the
immense mill for ten or twelve years in advance. This same ore averages
about fourteen pennyweights (approximately $14) per ton and upon this
there is assured a profit of over five dollars per ton.
XIII
VALUATION OF MINING PROPERTY.
Whenever a piece of mining property is to change hands, it is the proper
procedure to employ an expert engineer to investigate the ground and the
improvements and so arrive at some estimate concerning its intrinsic
value. Nobody is infallible and it is a trite saying that "nobody can
see into a mine farther than the last drill hole." But there is a great
difference in the reliabilities of reports made by trained and by
untrained men. A self-styled "expert" of the type which is so abundant
in every new mining centre and about cities frequented by mining
investors will probably not be able to comprehend anything beyond his
vision; but the mining geologist and engineer--the man who has devoted
the better part of his life to study and experience along these
lines--will be able to reach conclusions upon which much reliance may
be placed. This fact has come to be recognized by the men who exercise
business judgment in their mining investments.
The sampling of mines has been studied and improved upon by succeeding
engineers, until one may say that it is conducted along strictly
scientific lines. The old method of taking a sample of a mine by
scratching ore from the sides of a shaft from top to bottom and letting
the collected material at the bottom represent a fair average of the ore
body, has been relegated to its proper place in the evolution of mine
valuation.
Without entering into a description of the methods now employed by the
best examiners of mines, let it be said that every scientific precaution
is taken to obtain representative portions of the ore bodies, at such
intervals as seem best in each particular case; that measurements and
assays are made for each and every sample taken and not for the
aggregate of all the samples; that no opportunity is allowed
unscrupulous persons to vitiate results in any manner; that a
professional engineer will not hold nor acquire, in any way, an
interest in any proposition which he examines; and that the report of a
reputable engineer is equally acceptable to the seller and to the
purchaser, no matter for whom the work is done.
Much discussion has prevailed as to the best means of estimating the
amount and the value of ore in unbroken reserves. Associated with these
beneficial disputes, there has been a further controversy as to the
correct classification for reserves of unbroken ore. It is now conceded
among mining men and engineers to be improper to longer make use of the
meaningless but tongue-worn expression "ore in sight" as signifying any
known or unknown volumes of ore in the ground. The only ore in sight is
that which has been hoisted or which has been broken and stored
underground. Well-known engineers have proposed the following
expressions:
To denote the contents of ore bodies which have been exposed on four
sides, we may say _ore blocked out_, _positive ore_ or _ore developed_;
for bodies exposed upon three sides, it is considered correct to
describe the contents as _ore partly blocked_; for such bodies as are
proved upon two sides only, the terms _ore faces_, _ore developing_ or
_probable ore_ are appropriate; while in speaking of all ore that may be
expected or suspected, but which is beyond the last exposures, we may
use the expressions _ore expectant_ and _possible ore_.
When it comes to the question of placing a value upon an undeveloped
property--one in which there is little, or no, development work or
exploitation--it takes more than the ability of the common "expert" of
the curbstone variety to arrive at any dependable figures. Without any
exposures, except those that may have been produced by Nature, and
perhaps with no guidance from facts that might be obtainable were there
adjoining mines, one might suppose that the whole matter would resolve
itself into mysticism. Right here is where the trained man best shows
his ability.
The greatest error of the usual investor in mining schemes is to rely
upon either no report at all or upon a worthless one furnished by an
impostor. _In no sort of a mining proposition is a reliable report so
essential as when one is contemplating the purchase of a "prospect."_
Successful engineers, whose predictions concerning such properties have
come true, are sometimes complimented (?) by being accused of possessing
intuition or prophetic vision. Call this ability what we will, we must
admit that _education and training_ give certain qualifications that
will enable a man to arrive at conclusions which, in the majority of
cases, will be found to wear.
XIV
THE MINE PROMOTER.
With the thought that has justly been given to the place occupied (or
that should be occupied) in the world's financial and economic affairs
by legitimate mining, there has developed a well-founded stigma upon the
operations of a class of persons who have styled themselves by what was
formerly considered a worthy title, that of "promoters." Since men have
found that it is as possible to go into a mining deal with the same
chances for success as attach to any other line of investment; since it
has been proved that real, worthy mining property does not require the
exertions of many middlemen to obtain capital for its development; and
since it has usually turned out that these "promoters" have handed the
hot end of deals to their investors, it is not to be wondered that some
sort of a brand would attach itself to the men who are not in the
business to benefit the industry of mining in the least, but really for
the selfish gains which they can pocket at the expense of the industry.
These men are legion. The mails are laden with their seductive letters
and "literature." Brokerage firms are numbered among these leeches on
legitimate mining. Charlatans appear almost daily upon mining scenes.
The men who engage in these deplorable practices are not from any one
walk in life: they spring up from various branches of our social
structure. The general public has learned that a very prominent Boston
magnate will not scruple to promote a mining property even though it
lacks the merit essential in attracting the conservative capitalist.
Thousands of people of small means throughout the United States and
Canada have been recipients of nicely worded and familiarly-addressed
letters signed by the son of a famous American author. This son, himself
a writer of some repute, presumed to speak to his "friends" concerning a
mining property which he promoted and into which he was glad to allow
them to get with him "on the ground floor." He frankly stated that he
was not offering such privileges to the big capitalists. He inwardly
knew that such men do not require holdings in the Cobalt or any other
region. Through the splendid work carried on by the Government postal
authorities many of these frauds have been exposed and the perpetrators
brought to justice. In January, 1912, the above-mentioned author,
together with a number of his ilk, were brought before the Federal Grand
Jury, and found guilty.
It is not the men of great capital who are induced, as a rule, into the
deals of the "promoter." It is usually the common people, the persons of
small means who have saved up a little spare money from which they hope
to realize competencies for rainy days--a class of beings inexperienced
in investments--who become the dupes of the promoter.
There have been notable exceptions to the statement that capitalists do
not yield to the seductions of these men, but recurrences are liable to
be few. The great business man is fortified by experience against forms
of treachery and he is, therefore, not so susceptible to the allurements
of any "promotion," be it mining or otherwise.
If one investigates these advertised mining "promotions," he will often
find that the money paid in by the small investors purchases a very
small portion only of the capitalization. The men who conceived the
scheme of "promoting" a concern have carefully arranged to hold a
majority of the stock, so that should there, by any chance, prove to be
a mine, they are the ones who will reap the greatest benefits. Further,
it often transpires that the contributions of cash that purchase the
small interests do not perform the function of development for which the
stock was ostensibly put upon the market. Perhaps somebody has a desire
to get rich quickly. The operations of such frauds are so obscured and
so complex to the average individual that sufficient evidence can seldom
be procured to prove any violation of law.
A witty newspaper paragrapher once remarked that out in Nevada the old
adage "Death loves a shining mark" was changed to "Death loves a mining
shark." It would seem, however, that if Death were to love the person
bearing the odious, well-understood title of "shark" enough to claim him
early, the business of mining would be materially benefited. The
post-office officials of the United States are to be commended for their
efforts at curbing the despicable operations of these fakirs.
Occasionally the papers come out with the news that a firm's offices
have been raided and their business stopped. These news items fall as
awakeners upon the hundreds of gullible, middle-class persons all over
the country who are known to actually force their cash remittances upon
these fraudulent operators, much upon the plan of a department store's
supposed bargain sale.
In spite of the "bad name" that has been attached to the persons engaged
in starting up enterprises, there is a real need for more activity in
the matter of inaugurating real, legitimate mining enterprises. Persons
who devote their brains and energies in the direction of furthering
worthy mining propositions do really "promote" the interests of such
companies. What shall such persons be called if not "promoters"? There
does not seem to be any other word that expresses the occupation of such
persons. The real solution of this dilemma in which the honest men
engaged in such work find themselves placed is to denounce, forcefully,
the charlatan as being not a real promoter but a gross misrepresentation
of one.
Let us, therefore, remove the odium from this title and give our
approbation to those persons who are earnestly endeavoring, by honest
means, to place mining enterprises upon strictly business-like footings.
The mining industry needs promotion and promoters.
XV
INCORPORATION AND CAPITALIZATION.
Let us consider the legitimate financing of a new or a reorganized,
worthy, mining proposition. It is the universal custom to own and work a
mine under the laws that govern a corporation and, for this reason, the
mining man of the day is familiar with the practices of incorporating.
It is something of a question at the start to decide what is a fair
price to fix upon a property as a whole--that is, to decide what the
capitalization should be. There is no rule to be followed in this
matter. Some organizers will decide to capitalize at what is expected
will be the value of the property after some time. Other men will stick
to the idea that it is the proper thing to capitalize for what the
property will invoice at the time. The higher the capital stock, the
greater number of shares there are for sale, usually. With a
conservative capitalization, there may be fewer shares for sale, but
each share is worth correspondingly more and the chances are much better
for an advance in the price per share whenever the mine becomes
productive. There are investors who will carefully investigate this
feature and will shun any mining stock which has any appearance of
over-capitalization. It would be well if all investors were to follow
this precaution.
But what about the price at which to capitalize a prospect? By a
prospect we here mean a property that has been favorably reported upon
as worthy of development but in which, up to date, there is little, if
any, showing of values or reserves. The engineer's report has
recommended the property as containing the possibilities of a mine. How
much is it worth? Can he or can anybody even roughly estimate the sum?
An engineer frequently does fix the sale-purchase price of a property,
but it is not so usual for him to decide upon a valuation for
capitalization. A very good guess may be made, perhaps, if there are
similar and neighboring properties which have been developed.
Assuming a prospect that has been reliably reported to the owners as
possessing the earmarks of a mine and as warranting expenditures for
exploitation, upon what basis should a company be capitalized? If the
owners of the property have capital, the chances are that they will not
care to share their holdings with other parties. But very frequently
worthy "prospects" are held by men of no means, and in order to develop
their mines the owners feel the necessity of cooperation with parties
who can furnish working funds. In every such instance, there will arise
this debate as to the proper basis of capitalization.
There is no human means of arriving at a _close_ valuation of any
prospect, so it becomes a matter of pure judgment as to future
probabilities and the possibility of placing the stock at the most
advantageous price. A company will, therefore, be stocked for some round
number of shares, say 100,000, upon which some empirical par valuation,
say $1, is placed per share. This is not to be understood as stating nor
assuming that the property has a present valuation equalling the par of
the entire capitalization. Who would assert that any mere prospect ever
had such a value as $100,000? No, it is not the intention of the
organizers to claim that the ground is worth the par valuation; but some
start must be made and so, in the absence of something precise, round
numbers are made to do service.
Stock is then offered at figures much below the par valuation and in
such quantities as will maintain sufficient capital in the treasury of
the new concern to get the property's exploitation under way and to so
sustain it as to make the prospect grow into a mine.
If shares are offered at 10 cents, it does not mean that a prospect is
worth even that valuation. It does mean (we are considering now only the
operations of honest concerns) that the men who are managing affairs
believe that the sale of so many shares at ten cents each will furnish
adequate means for the development and equipment of the mine. Therefore,
there is a _prospective_ valuation placed upon all such enterprises.
Is an investment in such a company to be considered as gambling? If
there have been sound assurances from reliable examiners concerning the
likelihood of the ground carrying the essentials of a mine and the only
uncertain element is the ultimate magnitude of the mine, then we might
say that the investment is not a gamble at all, since there is no chance
to lose. The purchase of such stock is a very sane investment and there
is no telling what the returns may reach.