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.
There is an amount of uncertainty about any mine or prospect that appeals to the speculative proclivities in humans and it is hard for most persons to resist the notion that greater or richer bodies of ore may, at any time, be discovered in their particular mining properties. Concerning the average stock purchaser, then, we may conclude that it is speculation rather than true investment that he is seeking.
The writer hopes that, even in the short preceding discussions, the reader will have come to agree with him and to understand that safe investments are as possible in mining as in any other business. It would be a great benefit to this great industry of mining were the public taught to take interests—that is, financial interests—in mining concerns with the same precautions and with the same sound business sense that accompany the purchases of interests in other enterprises. Writing along this line of thought, Mr. P. A. Leonard has this to say in The Mining World: "One very general difficulty seems to be that the man unacquainted with mines who is asked to invest either expects an unreasonable return for his money, or he blindly closes his eyes and takes what he calls a 'flyer,' expecting little more from it than he would if he bought margins on 'change or bet on a horse race."
About the first thing that the promoters of a new mining company do is to issue a neat, attractive prospectus. It is a bait, no matter how reliable these men may be nor how worthy the property they desire to work. Many of these documents are written in absolutely good faith and every representation is intended to be accurate. There are occasionally offered for sale stocks in mining properties that warrant the fullest confidence of the promoters and the investors. However, careful perusal of a great many of these pamphlets has led the writer to the conclusion that at least 75 per cent. of them are unreliable from the fact that they either wilfully misrepresent or because they grossly exaggerate the probabilities of success beyond all reason. Exaggeration is a habit with some people and it is used many times with no real criminal intent or even consciousness upon the part of the offender. But its effect is just as baneful when innocently inflicted as when it is used in a premeditated manner.
Good, worthy mining property does not need to be hawked, usually. There have been periods of financial unrest when it has seemed quite impossible for honest men to dispose of interests in what were unquestionably reliable mining enterprises. At such times, there has been nothing to gain by any amount of teasing the public, and any attempts at forceful disposal of interests in the concerns have but served to kill any small remnants of confidence that the public may have possessed.
Prospectuses are usually prepared for the reading of small investors who may feel inclined to risk a few dollars or, in other words, to speculate upon the representations contained in the seductive pamphlets. There are a few "Don'ts" which it would be well for any person inclined to invest in mining stocks to read, consider, and follow. 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. Again, avoid placing any confidence in those companies that are simultaneously selling treasury stock and declaring dividends. This is a very common practice of the numerous "get-rich-quick" concerns which Uncle Sam has been routing the past few years. Such crooked practice is difficult to eradicate, although severe penalties are awarded the transgressors.
The success which has been met in the operation of the great mining companies of the world can, in the majority of cases, be traced to the common sense which was exercised in the business management. The business of mining is legitimate. If mining is one of the basic industries of the world, how could the operation of a real mine be anything but a legitimate business? The mere fact that there have been neat opportunities for, and the practice of, fraud in the growth of this tremendous industry does not by any means, argue that the whole thing is founded upon unstable premises.
What is needed is a presentation of the industry in its legitimate aspect before all kinds of investors and this can be done properly and effectively only by the rank and file of men interested in mining. These men should place themselves boldly on record as combating all sorts of deals that smack of fraud, and they should do their utmost to discourage all delusions that may exist in the mind of the public with reference to the supposed lure offered by mining.
There have been too many causes of failure in mining for even a partial enumeration of them. There have been many errors in getting started, both on the part of the organizers and the investors. There have been many mistakes in management. Many blunders have been evidenced in the operation of mines which made very good starts. All of these failures are attributable to something outside of the mine's intrinsic worth; they are mistakes due to inexperience or misconception. Such shortcomings should not be tolerated in the make-up of a mine's managerial staff.
Perhaps one of the most common mistakes of mine managers is to submit to a condition of nepotism that is often furthered by directors or stockholders. No responsible position around a mine should be filled by a novice. Just because a director has two or three sons needing situations does not make it incumbent upon a superintendent or a manager to jeopardize his reputation by employing these young men. Percy Williams, a veteran mining man, advised "Don't take your son or nephew or your clerk out of your store or business house and send him to Arizona or Colorado to run things for you at the mine. Sell out first. If you are a director in a mining company, do not force the manager or superintendent to find a job for all your unsuccessful friends and relatives. Let him hire his own men. Don't convert your mine into an asylum for ne'er-do-wells."
As already stated, there is protection obtainable by every investor in mining. One may always secure, at reasonable cost, the services of competent engineers whose business consists in sizing up the worth of mining property. If the services of these men were more generally appreciated and secured, there would be a great diminution in the number of disappointments following investments in mining. An eastern man of means complained to the writer about the way in which he had been "stung" in various mining investments. A little catechizing brought forth the facts that he knew absolutely nothing about mining in general and that, worse still, he had never investigated—that is, in a business-like manner—any of the propositions which had absorbed his ready money. Receiving no sympathy during the recital of his troubles but, instead, the assurance that he "got what was coming to him," he was prepared to sit up, take notice, and listen to a severe roasting which opened his eyes about mining matters. Now, this man has proved successful in other lines of business. He is a prominent lawyer and banker in his own city and has numerous, scattered, money-making interests. But he was content to go into mining without the investigation which it is certain he would have given to any other sort of an investment.
The time should come when there would not be such a prevalent "slaughter of the innocents" in mining investments. People must learn to curb their gullibility in such affairs. But this has proved almost impossible. Just as it is in the nature of some persons to gamble, and it takes something more than misfortune at gaming to wean them from the vice, so it is with a certain class of men who can not overcome the temptations of dabbling in mining. Such men will not desist even when they have suffered several delusions, and will continue to "send their good money after their bad," absolutely defiant of the well-meant advice of friends who are often in position to judge of the merits of any contemplated investment. Probably every mining engineer of any extended experience can tell of instances in which he has endeavored to discourage clients from investment in unworthy mining enterprises but in which the gambling instinct of the clients has overridden the sound advice.
During the early days of the wonderful Cripple Creek District, all sorts of wildcat tricks were successfully practiced upon the "tenderfeet" and the "down-east suckers." In one case, stock was readily unloaded upon the representation that a person could stand in the door of the cabin on the property and "look right into the shaft-house of the Independence mine." This statement was not untrue, although grossly misleading; for while it was actually quite possible by the use of a telescope to span the intervening three or four miles, visually, the prospect lacked the propinquity to the famous mine that was the bait implied by the statement in the prospectus. This is but one of many ingenious tricks that were played. Did the outcome of this one fraud cure the victims of irrational mining investment?
Railroads, too, have, in the past, added their troubles to the mining men. Recent laws have, however, to a great extent, mitigated the annoyances and unjust practices that the common carrying companies have been in the habit of committing. It is now obligatory upon a railroad company to treat all shippers without favor or discrimination, so that the difficulties formerly experienced by one mining company in getting enough ore cars to transport its shipments while its rival company could have cars in abundance, is now almost a thing of the past. It takes time to right all wrongs of this sort. It is a slow matter to get laws framed, passed through the necessary legislation, and made effective. But the outlook is favorable, along this line.
The leasing system has exercised an influence upon the mining activity of many districts. By this system is meant the custom of renting or letting the whole, or fractional parts, of a mining property to miners who enter upon and work the premises, extract the ores, and pay to the owners a specified percentage of the receipts from the marketing of the ore. This practice has frequently been the only successful way of operating some mines. It has, at times, been the manner of operating practically every mine in certain districts.
In districts carrying pockets of very rich ore, "high grading" has been discouraged in this way, for the "leasers" (incorrect, though common, word for lessees) do their own mining and there is much less object in stealing.
In other instances of mines which have been operated by the owning companies until they were past a profitable stage, it has been proved possible to prolong the life of operations very materially by leasing the property to miners, who always work with more diligence and economy for themselves than they ever do when working under "day's pay." This feature of leasing has been quite a factor in the lives of some of the mines of the Cripple Creek District. Until the recent drainage of the district through the Roosevelt Tunnel, there were numerous small—and even some large—properties that had worked all the ore bodies previously known to exist above the water level of the district, and had been obliged to shut down because of the heavy pumping expenses. Company operation did not longer pay. But the plain "leaser" and his partner could go into such old workings and they could prospect and find ore bodies that had escaped the observation of the superintendents. The expenses incurred in leasing are low. It is true that lessees will not probably take as good care of mine workings and equipment as will "company men," and often a property may be seriously crippled through the lack of sufficient timbering after having been in the hands of a set of lessees for some time. But, on the whole, there has probably been more benefit than loss through the letting of leases.
When, a few years ago, the plans of the National Forestry Service were put into effect, there was great complaint recorded concerning the rulings that were made against various miners. Some very well authenticated cases of wrongs were cited. However, it is now believed by all fair-minded men that there has been no intention, on the part of the officials of the Forest Service, to interfere with any legitimate mining enterprise. There was a well-founded object, viz., to put a stop to dishonest practices in obtaining title to timber lands by the misrepresentation of mineral finds.
The General Land Office passed a rule authorizing Foresters and Assistant Foresters to make inspections of all mining claims within their reserves and to report to the Secretary of the Interior. The idea embodied in this rule was that these men, being agents of the Government and upon the ground, are able to investigate the facts concerning every mining claim and its claimant and so to run across any evidences of fraud that might be attempted in the securing of title. Trouble immediately arose because the Foresters were not all experienced miners and prospectors and so were not thoroughly qualified to pass judgment upon the merits of mineral lands. This weakness has been admitted by the officers of the Service but the excuse has been offered that there was an immediate need for a great many Foresters and it was not possible to secure men trained in both forestry and mining at such short notice. "Just as soon as conditions became better understood, and money was available to allow the Service to hire men whose judgment in mining matters could not be gainsaid, such men were employed," says Paul G. Reddington, recently Forester for the Rocky Mountain Regions. It is true that much fraud has been prevented in the practice of taking up Government lands and it is also quite true that the Forest Service is endeavoring to uplift the mining industry in the western portions of the United States.
Mining is bound to become a still stronger factor in civilization as metallurgical processes multiply and there are discovered means of more economically extracting the valuable contents of ores. Minerals which are not now ores—according to the accepted, scientific definition, because the values cannot be recovered at a profit—will, at some future period, become ores. It is not safe to make any close predictions along this line, for such marked reductions in treatment costs have been going on during the last few years that mining men are entertaining great expectations. Inventions for improvement in metallurgical lines are being placed upon the market so frequently that it is difficult for even the professional metallurgist to keep posted. This being true, it is clear that the layman cannot expect to keep abreast of the metallurgical advance. At the same time, it is well for everybody to be slightly conversant with the wonderful advances being made in the reduction and dressing of ores. Conspicuous in this field are the improvements that have been effected in cyanidation, electrolytic amalgamation and extraction, and flotation. These processes are applicable to the lower grades of ore. Among the very recent successes in the treatment of very low-grade gold ores are the operations conducted in the new mills of the Portland Gold Mining Company, Stratton's Independence, and the Ajax Gold Mining Company, all in the Cripple Creek District. All of these mills are now treating old mine dumps, the contents of which were considered as absolutely waste matter at the time it was excavated. This stuff is now ore and its treatment is making fine profits. There is still a demand for cheaper methods of reducing ores of zinc. There are vast quantities of stuff that contains very good percentages of zinc, but the material cannot be mined and treated at a profit under existing conditions. With the invention of something radically new in the metallurgy of this metal, there will be opened an entirely different aspect in the zinc-mining regions. The Leadville District possesses great reserves of this material that is being held until it may become "ore."
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