Mining stock

“ Under ordinary working conditions, it should be considered just as essential for a mine to take an occasional inventory as it is for a mercantile establishment. In truth, there is far more need in mining operations of the knowledge thus derived than in any other business. In mining, as already suggested, the business is one of selling off the stock in trade without replenishing it. The opening of more reserves of ore is not bringing more goods into the stock, but it may be likened to simply unpacking more goods in the storehouse. ”

“ In spite of all warning and all examples, the average American will to a certain extent persist in gambling in mining stocks. Supposing this to be true, it is of value for the investor to learn something of the theory of mines, something enabling him to pass on the natural value of any mining stock which is offered to him. What, then, is a mine? What are some of the inevitable features in developing a mine? ”

“ It exists no more. All mine development work ceased long ago. There are green-stained carbonates on the surface, but there are no copper ore-bodies. The "mines" have been dismantled of their machinery and other equipment, and not even a lone watchman remains to point out to the desert-wayfarer the spot on which was reared the monumental mining-stock swindle of the century. Every dollar invested by the public is lost. ”

“ It may be taken as a safe axiom that to make gold-mining in the mine as distinct from mining on the Stock Exchange really profitable the same system of economy, of practical supervision, and scientific knowledge which is now adopted in all other businesses must be applied to the raising and extraction of the metal. Then, and not till then, will genuine mining take the place to which it is entitled amongst our industries. ”

“ 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, [141] 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. ”

“ And our nation, our states, allow us to do it. They even—as recent legal proceedings prove—allow the "inside" operating stockholders to borrow money to pay dividends to the "outsiders." That keeps up the "values" in the market. It does not enhance the real value in the mine.
ENGLISH VS. AMERICAN MINE REPORTS Again, granted even a valid and a well-managed mine, how much information regarding it does the average investor in the stock secure? In a general way, he knows in advance that all mining, whether placer or quartz, is very expensive. ”

“ For instance, never invest in any new stock whose company guarantees specific dividends. Profits in mining, except in rare cases, cannot be so accurately foretold as to warrant such a guarantee. We should remember that the success of any mine depends upon many, very many, contingencies and that some of them are invisible and are among Nature's secrets. ”

“ Hence, there is no propriety in the act of self-appropriating half the capital stock by the organizers. Investors should be wary about taking interests in companies which have been so organized. If an owner believes that a mine is worth ten times as much as a prospect, let him be consistent and offer his undeveloped property for a tithe of the capital stock in the anticipated mine. ”

“ Immediately after my unfortunate alliance with Brewer I formed an association with two men who, with me, believed in going at the mining game legitimately. By this I mean it is legitimate to buy options on prospects and properties which look good and place them on the market after they have been carefully examined by mining experts. Placing them on the market involves forming stock companies in each of which we must have the controlling interest. If the properties turn out well we continue to develop them and work them for all they're worth. ”

“ Eastern securities markets were in the doldrums. Time money commanded a big premium. Prices for all descriptions of mining stocks had flattened out to almost nothing. Investors were at their wits' end to protect commitments already made. Financiers everywhere were depressed. A revulsion of sentiment toward speculation had set in, seemingly for keeps. Only a hair-brained enthusiast of the wild-eyed order could hope at such a time possibly to succeed in the marketing of new mining issues. ”

“ 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. ”

“ 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 coöperation 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. ”

“ It is possible to obtain, through competent engineers, the approximate present valuation and the probable life of any mine and thus to arrive at conservative figures that will govern one's investments. But, when debating the purchase of stock in a prospect, a man should learn all the available facts concerning the geology and the organizers and should then decide, in his own way, whether he cares to make the purchase. ”

“ INVESTMENT IN MINING STOCKS.
As a feature of investment in mining stocks, there has always been a more or less open lure. Generally much larger returns are promised or are expected than in other kinds of investments. There may be absolutely no intention on the part of the seller to create this impression; but there does, somehow, exist in the memories of people accounts of wonderful fortunes that have been made in mining. ”

“ The great business man is fortified by experience against [137] 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. ”

“ In a general way, any company whose shares are offered on the stock exchange is indirectly inviting the public to become partners in the business, and these partners are entitled to all the information which affects the value of their property and are entitled to it promptly. Moreover, mining is a business where competition is so obscure and so much a matter of indifference, that suppression of important Page 179 facts in documents for public circulation has no justification. ”

“ I sought new outlets for my mining properties, among the highest financial circles of England, not by means of stock exchange exploitation but by sales to intelligent and provident investors. The North Bloomfield mine was well and favorably known in England. One of its owners was Tom Bell, an English resident of San Francisco, who cut a large figure in the old days. I had actually arranged the complete details of the sale of this property for four hundred thousand pounds. A meeting was held to confirm the transaction and pay in half the purchase price, when an unfortunate remark of Mr. ”

“ It should be said at once to that class who want large returns on investment without investigation as to merits, or assurance as to the management of the business, that there is no field in this world for the employment of their money at over 4%.
Unfortunately for the reputation of the mining industry, and metal mines especially, the business is often not conducted or valued on lines which have been outlined in these chapters. There is often the desire to sell stocks beyond their value. There is always the possibility that extension in depth will reveal a glorious Eldorado. ”

“ What rate of excess return the mine must yield is a matter of the risks in the venture and the demands of the investor. Mining business is one where 7% above provision for capital return is an absolute minimum demanded by the risks inherent in mines, even where the profit in sight gives warranty to the return of capital. Where the profit in sight (which is the only real guarantee in mine investment) is below the price of the investment, the annual return should increase in proportion. ”

“ Due consideration must always be given to the selection of some method of opening up what might be supposed will never amount to a great mine, so that, should subsequent disclosures exceed expectations, enlargement of the scale of operations can be advantageously effected. Always bear in mind that legitimate mining is just as much a commercial enterprise as is any other kind of business. The utmost concern for financial showings must be constantly borne in mind. Select a scale of operations consistent with the known—not the hoped-for—bodies of coal or ore ”

“ Investors have preferred to buy town lots rather than industrial stocks. In older and more settled communities the opposite condition prevails. On the other hand, coal on the cars is cash. The mine operator takes his bill-of-lading to the bank and draws up to two-thirds of its face value. This enables him to meet his fortnightly pay-bill and general mining expenses, but, for two or three years, until sufficient rooms have been made in the workings of the mine, he cannot expect it to do more. ”

“ Every ton of stone broken and treated from even the best gold mine in the world makes that mine the poorer by one ton of valuable material; thus, to buy a mining property on its past reputation for productiveness is, as a rule, questionable policy, unless you know there is sufficient good ore in sight to cover the purchase cost and leave a profit. ”

“ The price of gold, which is itself the standard of value, could not rise to offset growing mining costs and to maintain profits, as was the case with iron, copper, and the other metals,—with the result that the margin of profit in gold mining became so small as materially to affect exploration and production. Another important cause of decreased production was the actual exhaustion of certain mines, and the lowering of the grades of ore available in many others. ”

“ Mines are very seldom priced at a sum so moderate as that represented by the profit to be won from the ore in sight, and what value should be assigned to this unknown portion of the deposit admits of no certainty. No engineer can approach the prospective value of a mine with optimism, yet the mining industry would be non-existent to-day were it approached with pessimism. ”

“ Further improvements in the processes of reduction will doubtless increase the mining area, by making it worth while to develop mines where the percentage of metal to rock is now too small to yield a dividend. Improvements, moreover, tend to accelerate the rate of production, and thereby to shorten the life of the mines; for the more profitable working becomes, the greater is the temptation to work as fast as possible and get out the maximum of ore. ”

“ These deposits are naturally the first to fail in productiveness, but the neighboring hills are formed of a gold-bearing quartz which is being crushed, night and day, by hundreds of powerful machines; and the works still pay ten thousand miners fair day-wages, besides giving the organized companies who employ them satisfactory dividends. Thus mining has been largely robbed of its adventurous character in this neighborhood, and perhaps also of most of its alluring charm, having become a sort of regular industry, like coal-mining, or even brick-making. ”

“ In many instances, indeed, profits are more or less uncertain during the whole life of the mine, and it is evident that the value of the mining property must be more or less speculative. In the case of a developed mine its life may be predicted in many cases with absolute certainty—as when the extent of the mineral deposit and the volume of mineral can be measured. In other cases the life of the mine, like the value of the mineral, is more or less uncertain. Further, both time and money are required for the development of the mining property before any profit can be realized. ”

“ The metal produced from the poorest mine that is worked, must at least have an exchangeable value, not only sufficient to procure all the clothes, food, and other necessaries consumed by those employed in working it, and bringing the produce to market, but also to afford the common and ordinary profits to him who advances the stock necessary to carry on the undertaking. The return for capital from the poorest mine paying no rent, would regulate the rent of all the other more productive mines. ”