It has been necessary, a number of times in this discussion, heretofore, to make mention of kinds of ore bodies. It is well, at this time, to get some fixed ideas concerning the leading types of bodies of minerals which are extracted as ores.
Because of the laxity in type differentiation which has prevailed among miners and writers, the same geologists who have framed definitions of ore, have also defined the various types of ore bodies. The definitions, having been accepted by the leading mining geologists and engineers of the present day, it is well for us to fall into line and to agree with the authorities in such matters.
A vein is a single, ore-bearing fissure, generally, though not necessarily, with at least one well-defined wall.
When we run across a tabular-shaped deposit of ore that looks as though it may have been put into a pre-existing fissure or chasm, the chances are that it is a vein. But a vein must not be confounded with a dike. A dike is a filling that has been injected, while molten or fluid, into an open passageway or rupture across rocks, or into an opening which it created for itself. A little examination of the material should tell, to even the novice, whether or not the substance is of plutonic origin. The filling of a vein is not eruptive, at all. Veins have been filled from circulating aqueous solutions, by slow depositions, that have occupied very long periods.
A vein may be any thickness, since a fissure may have been opened to any width. Hence, a vein may be as thin as a sheet of paper, or it may be a hundred feet across. However, it is true that some wide veins have resulted by a sort of enlargement from original thin seams. Very few of the notable wide veins of the world are believed to have been created by the filling up of chasms originally as wide as the present ore bodies. But, in all cases of real veins, there were original fissures, fractures or crevices which acted as channels for circulating solutions that contained the materials which were left to make the vein matter.
A lode is an assemblage of veins so closely spaced that the ground between the veins becomes, in places, ore-bearing, and the entire width of the aggregation becomes an ore body.
A zone of sheeted rocks like schist or slate, if sufficiently mineralized to warrant mining, would be a lode. Sometimes, in certain districts, the earth's crust has been subjected to many approximately parallel, closely-spaced fractures, and by the subsequent filling of these cracks, with the accompanying corrosion of the walls and their replacement by ore, extraction of the entire mass of rocks across a considerable distance will be found to yield a profit. Any such body is a lode.
In the Cripple Creek District, the ground is criss-crossed in every direction by tiny fissures which have resulted from the contraction of the country rock, just as a bed of mud is fissured in the process of drying up after a rain. Wherever these fissures are found in aggregates that are closely spaced and in which a majority of the cracks have a general trend so that the whole assemblage can be readily worked as one mass, this whole body of fractured rock may be found worth mining and it will then constitute a lode. It may be mentioned here that the so-called ore of this district is not really ore according to the accepted definition. The true ore, the filling of these innumerable, tiny cracks, really constitutes but about five per cent. of the material that is shipped as ore, but which is principally the "country rock" broken down with the small volume of ore.
In legal phraseology, the word lode has come to include all sorts of ore bodies. When the word is thus used, in a legal sense, it should not be confused with the strictly technical meaning.
It has been the fashion for prospectors to dilate upon the fact that they have located "true fissure veins." This expression, formerly on the tongues of most mining men in districts possessing veins at all, is now obsolete and hence should be placed in the discard. There can be no such thing as an "untrue" vein nor an "untrue" fissure. Neither can there be any vein without a fissure. Therefore, if there is any vein, it must be a real or true vein. Accordingly, the verbiage is to be discouraged. The intention of a miner, in using this pet phrase, has been to convey the impression that his vein extended downward, indefinitely; there having arisen a notion that some veins are rather superficial and liable to "peter out" at slight depths, while others—the kind he invariably has located—persist both in size and value to extreme depths.
There are districts in which are found short fissures, generally confined to certain horizons in sedimentary rocks, such as the limestones of the great Mississippi Valley, from which are mined lead and zinc ores. These are called "gash veins." These are always readily recognized and there is not the slightest excuse for confusing them with the fissures which are common to other kinds of rock formations.
A bed or blanket vein is the term applied to any nearly flat deposit conforming to the bedding. Such a body of ore must be in a sedimentary series of rocks. Coal bodies are all of this type. Many bodies of iron ore are also of this type.
A chimney is an ore body which has not the tabular form of a vein but is rudely elliptical in outline, horizontally, and with a very considerable vertical extent. A stock is a similar body but it is of still greater irregularity of boundary.
These bodies are usually the filling of extinct volcanoes or geysers, and therefore they are presumed to extend to very great depths. The diamond mines of Kimberly, Africa, are of this type and the ore is a sort of hardened geyserite or mud in which are enclosed the precious gems. In Custer County, Colorado, the ore body of the Bassick Mine is a conglomerate of rounded boulders of all sizes cemented together, somewhat like concrete, by the materials which really carry the values. This mass occupies an ancient volcanic neck or throat of a geyser, probably the latter. The main portion of the Cripple Creek District is the crater of a great prehistoric volcano. It might be called a great chimney, but custom seems to limit the use of the word chimney to a smaller body such as might be included in a single mining property.
A mass is a deposit whose irregularity of shape is so great that it cannot be recognized as belonging to any of the types already mentioned. Masses conform to no rules as to shape or size. They are usually the result of a chemical dissolving of the original barren rocks with a simultaneous or subsequent substitution of valuable materials. There are many instances of ores that have been deposited, molecule by molecule, replacing equal volumes of the previous rock, much upon the order of the petrifaction of wood. Again, there are immense masses which are believed to have accumulated in caves already dissolved out of the containing rocks.
While recent geological study of the districts in which such ore bodies abound have disclosed numerous facts about their occurrence, there still remains much conjecture concerning their origins, and we may still believe that they do not conform to any rules as to regularity or size. The ore bodies of Leadville are of this type, and they may be described by the homely similes that they are as like and as unlike, and their occurrences are about as regular, as potatoes in a hill. The potato-tops give the farmer a suggestion as to where to dig. So, also, do certain geological relations guide the miner. And yet a shaft may be sunk hundreds of feet down among masses and not happen to penetrate a single one.
There are numerous recognized types of ore body not enumerated here; but it is sufficient for the average layman in mining matters to understand these few distinct types and to believe that all other types are rarities, and are, as a general thing, but intermediate forms of those defined.
Shaft No. 3, Tamarack Mining Company, Calumet.
Shaft No. 3, Tamarack Mining Company, Calumet, Michigan.
Smeltery of the Balaklala Consolidated Copper Co.
Smeltery of the Balaklala Consolidated Copper Co.,
Coram, California.
The prevailing belief of a few years ago that ore bodies always improve with depth has been discredited. Not a single mining geologist will longer maintain such a notion. The evidence of many thousands of mines has refuted this older belief and it has been proven that quite the opposite view is the correct one concerning changes of value with depth. Values, instead of getting better, do actually, in the majority of cases, grow poorer as depth is gained.
President C. R. Van Hise, of the University of Wisconsin, was among the early expounders of the newer theories to account for this fact. The writer heard him state, years ago, before a scientific gathering (which, at that time, was not quite ready to agree with him), that if he were given his choice, he would much prefer to own the upper thousand feet of the earth's crust than all the rest of the globe. In this remark, he was referring only to mineral values, of course.
This belief that the best values are to be found not far from the surface has since become popular, for it is based upon proven facts. It is not claimed that values are never mined below an elevation that is a thousand feet from the surface. There are many mines, and great ones, too, that are operating at depths greatly exceeding this distance; but in these same mines there will be found valid reasons for not applying the general statement to their particular cases. For instance, the great copper mines of the Keweenaw Peninsula are productive at depths of a mile or more from the surface; but we believe that here the ore must have been originally deposited at, or near, the surface, that it was then overlain with rock strata; and subsequently steeply tilted by earth movements which carried some of the ore bodies down to the depths where they are now found.
The "reefs" or bankets of the Rand are so termed because these ore bodies were undoubtedly ancient coast beaches or sea placers. The gravel, sand, and gold particles were cemented together into a conglomerate, then covered with many later sedimentaries, and finally the continent of Africa was so raised or altered in some manner as to bring these gold deposits into their present inland and tilted positions.
In veins or lodes, it is not supposed that ore-making minerals could have been precipitated from solutions travelling either upward or downward and obeying chemical laws if the depth were sufficient to furnish great temperature or high rock and hydrostatic pressures. Therefore minerals which were deposited from aqueous solutions rising from depths, for example, must have retained their dissolved condition until they ascended to horizons in which both pressure and temperature were low enough to permit the precipitation and crystallization that create ores. Contrarily, descending solutions must have given off their contents before reaching the deep zones of heat and pressure, or not at all.
It is a quite common phenomenon to observe that the richest gold ore in a mine is found close to the surface, if not actually at "grass roots." The explanation is simple. The gold, being the most stable of the aggregate of minerals composing the original ore, has the better resisted the corrosive attacks of atmospheric agencies and has remained nearly intact, while its associated minerals have been dissolved or altered and carried away. The same amount of gold remaining with a diminished quantity of the worthless, non-metallic minerals—the "gangue"—inevitably renders the ore richer per unit of weight (such as a ton), although per unit of volume the value remains constant, or nearly so, so far as the gold is concerned.
But with other kinds of ore, as, for example, copper, the best grades are found, not close to the surface but some two hundred or more feet down. The explanation is that the minerals of copper are considerably more soluble than the ordinary gangues and therefore the weathering and oxidation that takes place in the upper horizons of ore bodies will dissolve out the cupriferous compounds and thus deplete the superficial ore. But, by the flowing of the copper solutions to a lower zone, there occur certain reactions that reprecipitate the salts of copper upon compounds of the metal already formed and we have instances of the phenomenon known as "secondary enrichment."
Concentrator Division, Washoe Reduction Works of the Anaconda Copper Mining Co.
Concentrator Division, Washoe Reduction Works of the Anaconda Copper Mining Co.,
Anaconda, Montana.
Largest Copper Works in the World.
It was this very process that effected the changes in the character of 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.
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.
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.
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 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. 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.
When incorporating a new company, it has become the fashion for the owners of the ground to exchange their titles for certain specified fractional interests in the company. This is effected usually by going through the formality of having the owners sell their holdings outright for the entire issue of the capital stock. Then, according to prearranged agreements, these owners donate to the treasury of the company a portion of this capital stock to be henceforth termed "treasury stock." The first step makes the capital stock "fully paid for," since it has been accepted in full payment for the property. The second step supplies the company with the necessary means for raising funds to develop.
There can be no reasonable objection to this practice. But there is much criticism of the usual apportionment of the owners' and the treasury stock. It is agreed that the incorporators are, as a rule, greedy in this respect, since they generally issue more than 50 per cent. (and frequently 60 per cent.) of the capital stock to themselves and expect to float the project to success upon the money derivable from the sale of the balance or treasury stock.
Is a mere prospect, even under the best natural conditions, plus the effort incidental to the organization of a mining company, worth one-half or more of a producing mine? During an extended experience in the business of converting discoveries into patented claims and prospects into mines, the writer has found that there is never an owner who is willing to sell a developed mine for twice the price he had set upon the original prospect. The valuation of his holdings goes up by greater multiples than mere doubling or even trebling and it is a rare thing to find a man willing to sell out a proved mine at less than ten times the prevailing valuation that would have been placed upon the same piece of property before its development.
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. If he has a worthy piece of ground, he will reap the same benefits as the holders of the stock who place their cash against his title to a tract of virgin territory. If he will not thus act fairly, it indicates either a questionable piece of property or an avidity undesirable in a partner. It is accordingly advisable to shun offerings in such concerns.
Another matter to be considered here is that of overloading a fairly good mining enterprise with so much capital investment that the property cannot be made to pay proper dividends and fair interest on the capital. Many worthy, though perhaps small, mining concerns have made failures through a disregard for this economic feature. The proper adjustment of this matter is a serious thing and it should not be passed over lightly. Investors should look into this phase of mining thoroughly.
One should be able to establish, in his mind, a distinction between the value of investments in operating mines and in prospective mines; and he should likewise be competent to fix some difference in his attitude when purchasing the stocks in these dissimilar projects. One should invest in an established mine with the same business precautions that would guide him in buying an interest in a mercantile establishment.
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. Even the prospects offering the finest inducements have been known to disappoint, just as some less promising prospects have occasionally exceeded expectations.
Mill of the Roodepoort-United Mines, Transvaal, South Africa.
Mill of the Roodepoort-United Mines, Transvaal, South Africa.
So, while there are certain safeguards to investments, there should also be accepted the uncertainties which must accompany the placing of faith in unseen things.
The same general rules for business success will attend both commercial and mining enterprises. Any incorporation must be handled according to recognized, successful methods, no matter what its scope or activity. In most lines of business, there is a likelihood of growth with longevity, there being no reason to limit the life of the usual mercantile business. With advancing years, a manufacturing company, for instance, with good management, will establish a reputation and will gradually increase its business and its stock in trade. But with a mine, the business is one which is most successful only when actually depleting the assets at the most rapid rate. With some kinds of mines such as coal, placer, iron or the "reef" gold mines of the Rand, the life can be very accurately forecast and all activities may be planned for specified periods.
In some kinds of mining ground—as for instance, the irregular masses of Leadville or the crooked and uncertain veins of Tonopah—there can be no predictions that will reliably or even approximately decide the probable life of the mining activities of any company. The duration of mines of this second class is wholly problematical. A few years ago, there was much discussion of this subject and one writer, who had collected statistics over an extended period and covering various kinds of mines, arrived at the conclusion that the average life of a mine is about eleven years. J. P. Wallace, in his work, Ore Deposits for the Practical Miner, in discussing this point says, "The average mine, if continuously worked, seldom lasts longer than three to five years. A mine is valuable not for what it has produced, but for what it is capable of producing." This opinion cannot be borne out by facts, for the brevity he ascribes to the average mine is altogether unreasonable and his statement is pessimistic. The cases of mines which have petered out in three or five years are exceptionally few. It must be that the experiences of this author have been in "pockety" districts, for he could not have lived in any of the worthy mining camps of the world very long and have come away with any such notion.
To take care of this intrinsic feature of mining, and to place propositions fairly before the public, there should be attention given to the matter of recovering the invested capital before the expiration of activities through the exhaustion of mining assets, the ore bodies. This practice, known as "amortization," is being given more and more consideration as people come to realize this peculiarity of mining. Some companies are now so organized and managed that there is a guaranteed refund, at stated periods, or whenever profits have accrued, of fractions of the invested capital with accumulated interest thereon. These funds are calculated to continue over the number of years which it is presumed the mines will live so that upon the cessation of mining, the owners of the stocks will have been completely reimbursed with their original outlay in addition to the dividends that have resulted from the success of the enterprise. It is here that the problem of the life of a mine enters into economics, and it is important that it be given its due share of study. Amortization is not of American origin and it has not been adopted in this country to the extent which it is bound to be in the future.
One means of providing against an extinction of a mining company's activity with the exhaustion of the ore bodies in the mines is to provide new mining territory to which operations may be transferred at the proper time. This plan has been very successfully carried out by a number of large mining companies. When a mining company has been maintaining its identity for a considerable period, it has reached a very desirable stage of economy in the make-up of its various lists of officials, superintendents and engineers. All this efficiency can be very readily transferred to the operation of virgin mining property. Often much of the equipment of a mine can be moved and used again. When a mine is known to be nearing its finish, there is a hesitancy on the part of the owners in replenishing the equipment and sometimes the mining is kept up through the use of worn-out, inefficient apparatus when, were the owners expecting to continue mining, they would purchase and install the new equipment when it is needed.
One company in the San Juan region of Colorado prepared for the contingency by purchasing neighboring property to which it moved its operations. Another large company bought a large piece of mining property in Mexico, although its initial operations were in Colorado. Placer mining companies frequently dismantle, move and re-erect dredges.
There is a constant tendency toward the adoption of machinery for the performance of every mining act which, formerly, was done by manual or animal labor. There are good reasons for this tendency. Good, trained labor is scarce; wages are slowly but gradually rising; ores of lower grade must be mined, and the tonnages must be correspondingly greater. The increased economy in production can be brought about by the adoption of devices that will supplant, and even excel, muscular effort.
A machine can now be installed and can be operated by a single man to perform the work formerly done by many men. There have been machines invented to entirely, or partially, perform every operation in and around mines, and one might imagine an ideal mine in which all such machines were installed. But even there, we should have to grant the presence of some few men, for it would not be possible to keep all the machines working without human, intelligent control. In such a mine, it might be possible to maintain a large production with very few laborers or overseers. Fewer men means less wages, less labor trouble, fewer fatalities, and less time occupied in handling men into and out of the workings.
In some ways, copper mines are ahead of gold mines in their equipment. Coal mines have adopted car loaders which as yet and without any very good reasons metal mines have not.
Plants for mines must utilize the same sources of power as are used by any other plants. Steam and water have been the usual forms, but electricity is gaining in favor in places where it can be cheaply obtained. At a coal mine, we naturally expect to see all the power generated through the combustion of coal under boilers. At metal mines—which are frequently remote from sources of coal supply—we run across the use of expensive coal for all power purposes. When it is possible to obtain a sufficient supply and head, water is adopted to furnish the required power for operation. At mines, with water sufficient to produce a part only of the needed power, we may see both steam and water power utilized. In the cases of some mines which are distant from sources of both coal and water supply, power is generated at points where stores of natural energy are available for use and the power is transmitted (usually as electricity, sometimes as compressed air) over long distances to the mines.
Some mines cannot be economically operated without the treatment of the ores upon, or close to, the mining property. With certain sorts of low-grade ore, or with those kinds of ores that may be concentrated before shipment, provision should be early made for the erection of appropriately designed mills. We say the subject should be considered early, but we do not advocate the premature erection of any mill. The hills of the Western mining states are dotted with monuments to men's error in this particular. Here and there (not in our own country alone, but throughout the mining world) one may run across an abandoned mine plant, a complete mill, a smeltery, a railroad or an aerial tramway, all prematurely provided for outputs which failed to materialize.
There are men still trying to succeed in the mining business while thinking it is essential in mining that a complete plant be the first thing given attention. Upon the showing in a ten-foot hole, such men will induce capital to take interests enough to provide the wherewithal for purchasing and installing an equipment capable of handling and treating the output of a big mine. This is a grievous mistake that comes about through misconceptions. It is often true that ores of the kind these mines are expected to produce should be treated upon the ground. But it is also true, and far more essential, that there be enough ore to supply the treatment works. It is rank folly then to spend the money needed to make a mine upon a plant to handle the product. Money should be spent, first, in exploitation and proving the value of a property. If the proof is forthcoming, it is then time enough to erect the plant. Meanwhile, during the development stages of a mine, the proper amount of experimentation can be conducted to ascertain the correct process for treating the ore. If ores are produced in abundance, they may be shipped for treatment in custom works until such time as the company's own plant is ready; or the ores may be stocked up for emergency mill supply at future times when it may be compulsory to curtail the mine production because of accidents or other unforeseen causes.
One who considers these matters from an economic standpoint will recognize that there must exist some proper ratio of mine output to treatment capacity. Just what this relationship is constitutes a serious problem for each particular mine and there cannot be stated any ironclad rules that may be applied to all cases.
In the first place, we believe a mine will be operated at its greatest economy when it is making its largest and most regular output. This being the case, we must agree that the plant and mill must be capable of taking care of this maximum output. It would then seem axiomatic that the equipment must be calculated according to the mine's capabilities. But, in the youth of a mine, how are we to know what its mature capacity will be? Here comes the rub.
Very nice discussions along this line have been indulged in by British and American representative mining men. When speaking of operations that are typical of some foreign mining districts and especially those that possess ore-bodies whose extents are readily calculated, no clever prophecy is required to ascertain the proper amount of equipment. But there are many regions, especially in our own country, where nobody can predict, with any degree of accuracy, how extensive will prove to be the natural reserves of any mine. It is in such places as these that hard study and careful guessing are needed, and we are inclined to agree with George J. Bancroft when he says, "To my mind, there is more credit due to those who take up the hard propositions and make them pay than to those who exploit bonanzas along purely scientific lines. The first usually require energy, sagacity, perseverance and, very often, daring; while the others need chiefly cool calculation."
It is a safe practice, throughout the world, whenever there is no absolute means of reaching figures of a mine's ultimate production, to erect the treatment installations in units. By a "unit" is here meant the outfit of machinery and the other equipment which will handle a specified round number of tons per day. In some districts, a unit will be for the treatment of 10 tons; in other districts this number may run up to 100 tons. In the plans provisions are made for additions, from time to time, as mining development warrants. Very much the same scheme should be followed in the erection of the plant for carrying on the operations, which are strictly those of obtaining the ore from the earth. That is, mining equipment, as well as the milling equipment, should be on a flexible plan so as to be readily adapted to an increased scale of operation. There must be space provided for harmonious additions to the initial plant whenever such extra parts are required.
Spray Shaft House of Copper Queen Consolidated Mining Co., Bisbee, Arizona.
Spray Shaft House of Copper Queen Consolidated Mining Co., Bisbee, Arizona.
No matter how splendid a company's holdings may be naturally, there cannot be expected any profits from the workings of the deposits if there be not a sound business management. H. C. Hoover, the prominent mining engineer and mine manager, says, "Good mine management is based upon three elements: first, sound engineering; second, proper coördination and efficiency of every human unit; third, economy in the purchase and consumption of supplies." And he goes on to emphasize the fact that "no complete manual will ever be published upon 'How to Become a Good Mine Manager.'" In view of this damper upon good intentions one might possess, and granting that the subject is one that cannot be taught (except along very general lines possibly), no attempt will be made to enter into arguments concerning this important subject of Mine Management.
Good administrative ability can be improved by cultivation just as can an individual of the vegetable kingdom; but there must first be the existent, innate ability. No man should attempt such a hard proposition as the management of a mine, with its varied phases of activity, unless he has found himself possessing the fundamentals that go to assure success in managerial positions. Furthermore, he should not think, because he has been successful in running a clothing business or any other mercantile line, that he is certain to succeed in running a mine.
The duties of directors and president are pretty much the same in all sorts of incorporations. But, while there are many mining companies—and successful ones, too—that hold upon their directorates men who probably never saw a mine prior to their present ventures, it may still be stated that it is obviously advisable to select for such places men who have knowledge and sound ideas concerning the industry of mining. To be sure, if they are ignorant along mining lines, they can, and often do, place the blame for their shortcomings upon their manager, their consulting engineer, or their superintendent. But this is not an auspicious state of affairs and it were well for stockholders to see to it that they elect to the directorate men who are cognizant of mining economics.
The well-organized mining concerns of today maintain their engineering staffs just as completely as do other great technical businesses. The engineer is a very important man in mining affairs. His duties are probably more varied than those that appertain to any other sort of engineering. His operations will extend into the realms of the mechanical, the civil, the chemical, the metallurgical, the hydraulic, and the electrical engineers. He must be posted along the latest conceptions in geology, mineralogy, and physics. Besides he should be an accurate and rapid mathematician and draftsman.
The manager finds in the engineer his most helpful and trusted aid. Often the engineer performs many of the functions usually attaching to the office of manager and, in the absence of the latter person, he may attend to all of the management. As stated above, the qualities that make a good manager are inherent; hence, to a certain extent, we may hold the deduction that good mining engineers, also, must possess innate qualities. Yet there may be pointed out this distinction between the make-up of a good man for manager and that of a good mining engineer: one, as said, cannot learn his business except through his own experience, while the other can receive vast benefit by study of a theoretical nature and by practice.
Lately, there is much said about the consulting mining engineer. His field of usefulness is broad. He can be asked to add his opinions and recommendations to those of the regular engineer, at any time; he can be used at times when the duties are too much for the resident engineer; he can be called upon to substitute; he need not live near the property, but may visit it periodically. Thus, while his retention is deemed remunerative, his services are available at a fractional part of what he would demand if he were employed exclusively by the company.
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. No new reserve can be added—they can simply be found and unpacked, as it were.
This finding entails the greatest amount of concern, and upon its successful practice depends the life of the mine. The presumption is strong that many mines have been abandoned while they really contained possibilities; but lack of knowledge of things geological, or perhaps failures to explore, permitted the operators to remain ignorant of the splendid assets that were available. Proof of this error has been found in many mines that have been subsequently re-opened.
The work of sizing up the quantity and the value of available ore is known as sampling. It is not well to limit the practice of sampling to the times only when a sale is contemplated. Reports based upon careful sampling should be issued frequently. Some companies employ men whose sole occupation is the daily sampling of every working face. The assay results obtained from the collected samples inform the superintendent just "how the stuff is holding up" throughout the mine and he governs his work accordingly. At longer intervals, the engineer should go into the work more thoroughly by not only taking very careful, scientific samples (not the usual "grab" samples taken by the daily sampler) but also by making careful memoranda of the physical appearances of the ore with its thickness and all geological data that will tend to throw light upon the permanency of each body. The engineer's monthly report will then be a substantial guide to the manager and the directors.
Managers, too, are expected to make periodical reports—monthly, quarterly, or annually—to the directors who, in turn, issue reports to the stockholders. The reports of managers and directors are not usually technical in their nature, although sometimes it is the practice of a manager to attach the engineer's report to his own for the perusal of such readers as may desire to dip into the technical affairs of the operations. Usually, the directors' reports are of a simple, financial nature, stating the conditions of affairs in plain business language to the persons whose cash has been invested in the enterprise.
It may happen that, for some reason, a special report is desired by the directors who may be contemplating some consolidation or other financial move and both the manager and the engineer will be required to furnish detailed statements concerning their respective branches. If a sale is planned, it may be that not only the company's engineer, but very probably another engineer engaged by the contemplative purchaser, will make examinations. They may work together or separately, as best suits them mutually, but it is upon the reports issued by them that the satisfactory price for the exchange of title is based.