Principles of Mining Part 4

in calculating costs upon mines where data of actual experience are not available. As costs will depend in the main upon items mentioned above, if the known costs of a going mine elsewhere be taken as a basis, and subtractions and additions made for more unfavorable or favorable effect of the differences in the above items, a fairly close result can be approximated.

Mine examinations are very often inspired by the belief that extended operations or new metallurgical applications to the mine will expand the profits. In such cases the paramount questions are the reduction of costs by better plant, larger outputs, new processes, or alteration of metallurgical basis and better methods. If every item of previous expenditure be gone over and considered, together with the equipment, and method by which it was obtained, the possible savings can be fairly well deduced, and justification for any particular line of action determined. One view of this subject will be further discussed under "Ratio of Output to the Mine." The conditions which govern the working costs are on every mine so special to itself, that no amount of advice is very useful. Volumes of advice have been published on the subject, but in the main their burden is not to underestimate.

In considering the working costs of base-metal mines, much depends upon the opportunity for treatment in customs works, smelters, etc. Such treatment means a saving of a large portion of equipment cost, and therefore of the capital to be invested and subsequently recovered. The economics of home treatment must be weighed against the sum which would need to be set aside for redemption of the plant, and unless there is a very distinct advantage to be had by the former, no risks should be taken. More engineers go wrong by the erection of treatment works where other treatment facilities are available, than do so by continued s.h.i.+pping. There are many mines where the cost of equipment could never be returned, and which would be valueless unless the ore could be s.h.i.+pped. Another phase of foreign treatment arises from the necessity or advantage of a mixture of ores,--the opportunity of such mixtures often gives the public smelter an advantage in treatment with which treatment on the mine could never compete.

Fluctuation in the price of base metals is a factor so much to be taken into consideration, that it is desirable in estimating mine values to reduce the working costs to a basis of a "per unit" of finished metal. This method has the great advantage of indicating so simply the involved risks of changing prices that whoso runs may read. Where one metal predominates over the other to such an extent as to form the "backbone" of the value of the mine, the value of the subsidiary metals is often deducted from the cost of the princ.i.p.al metal, in order to indicate more plainly the varying value of the mine with the fluctuating prices of the predominant metal. For example, it is usual to state that the cost of copper production from a given ore will be so many cents per pound, or so many pounds sterling per ton. Knowing the total metal extractable from the ore in sight, the profits at given prices of metal can be readily deduced. The point at which such calculation departs from the "per-ton-of-ore" unto the per-unit-cost-of-metal basis, usually lies at the point in ore dressing where it is ready for the smelter. To take a simple case of a lead ore averaging 20%: this is to be first concentrated and the lead reduced to a concentrate averaging 70% and showing a recovery of 75% of the total metal content. The cost per ton of development, mining, concentration, management, is to this point say $4 per ton of original crude ore.

The smelter buys the concentrate for 95% of the value of the metal, less the smelting charge of $15 per ton, or there is a working cost of a similar sum by home equipment. In this case 4.66 tons of ore are required to produce one ton of concentrates, and therefore each ton of concentrates costs $18.64. This amount, added to the smelting charge, gives a total of $33.64 for the creation of 70% of one ton of finished lead, or equal to 2.40 cents per pound which can be compared with the market price less 5%. If the ore were to contain 20 ounces of silver per ton, of which 15 ounces were recovered into the leady concentrates, and the smelter price for the silver were 50 cents per ounce, then the $7.50 thus recovered would be subtracted from $33.64, making the apparent cost of the lead 1.86 cents per pound.

CHAPTER V.

Mine Valuation (_Continued_).

REDEMPTION OR AMORTIZATION OF CAPITAL AND INTEREST.

It is desirable to state in some detail the theory of amortization before consideration of its application in mine valuation.

As every mine has a limited life, the capital invested in it must be redeemed during the life of the mine. It is not sufficient that there be a bare profit over working costs. In this particular, mines differ wholly from many other types of investment, such as railways. In the latter, if proper appropriation is made for maintenance, the total income to the investor can be considered as interest or profit; but in mines, a portion of the annual income must be considered as a return of capital. Therefore, before the yield on a mine investment can be determined, a portion of the annual earnings must be set aside in such a manner that when the mine is exhausted the original investment will have been restored.

If we consider the date due for the return of the capital as the time when the mine is exhausted, we may consider the annual instalments as payments before the due date, and they can be put out at compound interest until the time for restoration arrives. If they be invested in safe securities at the usual rate of about 4%, the addition of this amount of compound interest will a.s.sist in the repayment of the capital at the due date, so that the annual contributions to a sinking fund need not themselves aggregate the total capital to be restored, but may be smaller by the deficiency which will be made up by their interest earnings. Such a system of redemption of capital is called "Amortization."

Obviously it is not sufficient for the mine investor that his capital shall have been restored, but there is required an excess earning over and above the necessities of this annual funding of capital.

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. There are thus two distinct directions in which interest must be computed,--first, the internal influence of interest in the amortization of the capital, and second, the percentage return upon the whole investment after providing for capital return.

There are many limitations to the introduction of such refinements as interest calculations in mine valuation. It is a subject not easy to discuss with finality, for not only is the term of years unknown, but, of more importance, there are many factors of a highly speculative order to be considered in valuing. It may be said that a certain life is known in any case from the profit in sight, and that in calculating this profit a deduction should be made from the gross profit for loss of interest on it pending recovery. This is true, but as mines are seldom dealt with on the basis of profit in sight alone, and as the purchase price includes usually some proportion for extension in depth, an unknown factor is introduced which outweighs the known quant.i.ties. Therefore the application of the culminative effect of interest acc.u.mulations is much dependent upon the sort of mine under consideration. In most cases of uncertain continuity in depth it introduces a mathematical refinement not warranted by the speculative elements. For instance, in a mine where the whole value is dependent upon extension of the deposit beyond openings, and where an expected return of at least 50% per annum is required to warrant the risk, such refinement would be absurd. On the other hand, in a Wit.w.a.tersrand gold mine, in gold and tin gravels, or in ma.s.sive copper mines such as Bingham and Lake Superior, where at least some sort of life can be approximated, it becomes a most vital element in valuation.

In general it may be said that the lower the total annual return expected upon the capital invested, the greater does the amount demanded for amortization become in proportion to this total income, and therefore the greater need of its introduction in calculations.

Especially is this so where the cost of equipment is large proportionately to the annual return. Further, it may be said that such calculations are of decreasing use with increasing proportion of speculative elements in the price of the mine. The risk of extension in depth, of the price of metal, etc., may so outweigh the comparatively minor factors here introduced as to render them useless of attention.

In the practical conduct of mines or mining companies, sinking funds for amortization of capital are never established. In the vast majority of mines of the cla.s.s under discussion, the ultimate duration of life is unknown, and therefore there is no basis upon which to formulate such a definite financial policy even were it desired. Were it possible to arrive at the annual sum to be set aside, the stockholders of the mining type would prefer to do their own reinvestment. The purpose of these calculations does not lie in the application of amortization to administrative finance. It is nevertheless one of the touchstones in the valuation of certain mines or mining investments. That is, by a sort of inversion such calculations can be made to serve as a means to expose the amount of risk,--to furnish a yardstick for measuring the amount of risk in the very speculations of extension in depth and price of metals which attach to a mine. Given the annual income being received, or expected, the problem can be formulated into the determination of how many years it must be continued in order to amortize the investment and pay a given rate of profit. A certain length of life is evident from the ore in sight, which may be called the life in sight. If the term of years required to redeem the capital and pay an interest upon it is greater than the life in sight, then this extended life must come from extension in depth, or ore from other direction, or increased price of metals. If we then take the volume and profit on the ore as disclosed we can calculate the number of feet the deposit must extend in depth, or additional tonnage that must be obtained of the same grade, or the different prices of metal that must be secured, in order to satisfy the demanded term of years. These demands in actual measure of ore or feet or higher price can then be weighed against the geological and industrial probabilities.

The following tables and examples may be of a.s.sistance in these calculations.

Table 1. To apply this table, the amount of annual income or dividend and the term of years it will last must be known or estimated factors.

It is then possible to determine the _present_ value of this annual income after providing for amortization and interest on the investment at various rates given, by multiplying the annual income by the factor set out.

A simple ill.u.s.tration would be that of a mine earning a profit of $200,000 annually, and having a total of 1,000,000 tons in sight, yielding a profit of $2 a ton, or a total profit in sight of $2,000,000, thus recoverable in ten years. On a basis of a 7% return on the investment and amortization of capital (Table I), the factor is 6.52 x $200,000 = $1,304,000 as the present value of the gross profits exposed. That is, this sum of $1,304,000, if paid for the mine, would be repaid out of the profit in sight, together with 7% interest if the annual payments into sinking fund earn 4%.

TABLE I.

Present Value of an Annual Dividend Over -- Years at --% and Replacing Capital by Reinvestment of an Annual Sum at 4%.

======================================================= Years | 5% | 6% | 7% | 8% | 9% | 10% -------|-------|-------|-------|-------|-------|------- 1 | .95 | .94 | .93 | .92 | .92 | .91 2 | 1.85 | 1.82 | 1.78 | 1.75 | 1.72 | 1.69 3 | 2.70 | 2.63 | 2.56 | 2.50 | 2.44 | 2.38 4 | 3.50 | 3.38 | 3.27 | 3.17 | 3.07 | 2.98 5 | 4.26 | 4.09 | 3.93 | 3.78 | 3.64 | 3.51 6 | 4.98 | 4.74 | 4.53 | 4.33 | 4.15 | 3.99 7 | 5.66 | 5.36 | 5.09 | 4.84 | 4.62 | 4.41 8 | 6.31 | 5.93 | 5.60 | 5.30 | 5.04 | 4.79 9 | 6.92 | 6.47 | 6.08 | 5.73 | 5.42 | 5.14 10 | 7.50 | 6.98 | 6.52 | 6.12 | 5.77 | 5.45 | | | | | | 11 | 8.05 | 7.45 | 6.94 | 6.49 | 6.09 | 5.74 12 | 8.58 | 7.90 | 7.32 | 6.82 | 6.39 | 6.00 13 | 9.08 | 8.32 | 7.68 | 7.13 | 6.66 | 6.24 14 | 9.55 | 8.72 | 8.02 | 7.42 | 6.91 | 6.46 15 | 10.00 | 9.09 | 8.34 | 7.79 | 7.14 | 6.67 16 | 10.43 | 9.45 | 8.63 | 7.95 | 7.36 | 6.86 17 | 10.85 | 9.78 | 8.91 | 8.18 | 7.56 | 7.03 18 | 11.24 | 10.10 | 9.17 | 8.40 | 7.75 | 7.19 19 | 11.61 | 10.40 | 9.42 | 8.61 | 7.93 | 7.34 20 | 11.96 | 10.68 | 9.65 | 8.80 | 8.09 | 7.49 | | | | | | 21 | 12.30 | 10.95 | 9.87 | 8.99 | 8.24 | 7.62 22 | 12.62 | 11.21 | 10.08 | 9.16 | 8.39 | 7.74 23 | 12.93 | 11.45 | 10.28 | 9.32 | 8.52 | 7.85 24 | 13.23 | 11.68 | 10.46 | 9.47 | 8.65 | 7.96 25 | 13.51 | 11.90 | 10.64 | 9.61 | 8.77 | 8.06 26 | 13.78 | 12.11 | 10.80 | 9.75 | 8.88 | 8.16 27 | 14.04 | 12.31 | 10.96 | 9.88 | 8.99 | 8.25 28 | 14.28 | 12.50 | 11.11 | 10.00 | 9.09 | 8.33 29 | 14.52 | 12.68 | 11.25 | 10.11 | 9.18 | 8.41 30 | 14.74 | 12.85 | 11.38 | 10.22 | 9.27 | 8.49 | | | | | | 31 | 14.96 | 13.01 | 11.51 | 10.32 | 9.36 | 8.56 32 | 15.16 | 13.17 | 11.63 | 10.42 | 9.44 | 8.62 33 | 15.36 | 13.31 | 11.75 | 10.51 | 9.51 | 8.69 34 | 15.55 | 13.46 | 11.86 | 10.60 | 9.59 | 8.75 35 | 15.73 | 13.59 | 11.96 | 10.67 | 9.65 | 8.80 36 | 15.90 | 13.72 | 12.06 | 10.76 | 9.72 | 8.86 37 | 16.07 | 13.84 | 12.16 | 10.84 | 9.78 | 8.91 38 | 16.22 | 13.96 | 12.25 | 10.91 | 9.84 | 8.96 39 | 16.38 | 14.07 | 12.34 | 10.98 | 9.89 | 9.00 40 | 16.52 | 14.18 | 12.42 | 11.05 | 9.95 | 9.05 ======================================================= Condensed from Inwood's Tables.

Table II is practically a compound discount table. That is, by it can be determined the present value of a fixed sum payable at the end of a given term of years, interest being discounted at various given rates. Its use may be ill.u.s.trated by continuing the example preceding.

TABLE II.

Present Value of $1, or 1, payable in -- Years, Interest taken at --%.

=================================== Years | 4% | 5% | 6% | 7% ------|------|------|------|------- 1 | .961 | .952 | .943 | .934 2 | .924 | .907 | .890 | .873 3 | .889 | .864 | .840 | .816 4 | .854 | .823 | .792 | .763 5 | .821 | .783 | .747 | .713 6 | .790 | .746 | .705 | .666 7 | .760 | .711 | .665 | .623 8 | .731 | .677 | .627 | .582 9 | .702 | .645 | .592 | .544 10 | .675 | .614 | .558 | .508 | | | | 11 | .649 | .585 | .527 | .475 12 | .625 | .557 | .497 | .444 13 | .600 | .530 | .469 | .415 14 | .577 | .505 | .442 | .388 15 | .555 | .481 | .417 | .362 16 | .534 | .458 | .394 | .339 17 | .513 | .436 | .371 | .316 18 | .494 | .415 | .350 | .296 19 | .475 | .396 | .330 | .276 20 | .456 | .377 | .311 | .258 | | | | 21 | .439 | .359 | .294 | .241 22 | .422 | .342 | .277 | .266 23 | .406 | .325 | .262 | .211 24 | .390 | .310 | .247 | .197 25 | .375 | .295 | .233 | .184 26 | .361 | .281 | .220 | .172 27 | .347 | .268 | .207 | .161 28 | .333 | .255 | .196 | .150 29 | .321 | .243 | .184 | .140 30 | .308 | .231 | .174 | .131 | | | | 31 | .296 | .220 | .164 | .123 32 | .285 | .210 | .155 | .115 33 | .274 | .200 | .146 | .107 34 | .263 | .190 | .138 | .100 35 | .253 | .181 | .130 | .094 36 | .244 | .172 | .123 | .087 37 | .234 | .164 | .116 | .082 38 | .225 | .156 | .109 | .076 39 | .216 | .149 | .103 | .071 40 | .208 | .142 | .097 | .067 =================================== Condensed from Inwood's Tables.

If such a mine is not equipped, and it is a.s.sumed that $200,000 are required to equip the mine, and that two years are required for this equipment, the value of the ore in sight is still less, because of the further loss of interest in delay and the cost of equipment. In this case the present value of $1,304,000 in two years, interest at 7%, the factor is .87 X 1,304,000 = $1,134,480.

From this comes off the cost of equipment, or $200,000, leaving $934,480 as the present value of the profit in sight. A further refinement could be added by calculating the interest chargeable against the $200,000 equipment cost up to the time of production.

TABLE III.

=========================================================================== Annual | Number of years of life required to yield--% interest, and in Rate of | addition to furnish annual instalments which, if reinvested at Dividend.| 4% will return the original investment at the end of the period.

---------|----------------------------------------------------------------- % | 5% | 6% | 7% | 8% | 9% | 10% | | | | | | 6 | 41.0 | | | | | 7 | 28.0 | 41.0 | | | | 8 | 21.6 | 28.0 | 41.0 | | | 9 | 17.7 | 21.6 | 28.0 | 41.0 | | 10 | 15.0 | 17.7 | 21.6 | 28.0 | 41.0 | | | | | | | 11 | 13.0 | 15.0 | 17.7 | 21.6 | 28.0 | 41.0 12 | 11.5 | 13.0 | 15.0 | 17.7 | 21.6 | 28.0 13 | 10.3 | 11.5 | 13.0 | 15.0 | 17.7 | 21.6 14 | 9.4 | 10.3 | 11.5 | 13.0 | 15.0 | 17.7 15 | 8.6 | 9.4 | 10.3 | 11.5 | 13.0 | 15.0 | | | | | | 16 | 7.9 | 8.6 | 9.4 | 10.3 | 11.5 | 13.0 17 | 7.3 | 7.9 | 8.6 | 9.4 | 10.3 | 11.5 18 | 6.8 | 7.3 | 7.9 | 8.6 | 9.4 | 10.3 19 | 6.4 | 6.8 | 7.3 | 7.9 | 8.6 | 9.4 20 | 6.0 | 6.4 | 6.8 | 7.3 | 7.9 | 8.6 | | | | | | 21 | 5.7 | 6.0 | 6.4 | 6.8 | 7.3 | 7.9 22 | 5.4 | 5.7 | 6.0 | 6.4 | 6.8 | 7.3 23 | 5.1 | 5.4 | 5.7 | 6.0 | 6.4 | 6.8 24 | 4.9 | 5.1 | 5.4 | 5.7 | 6.0 | 6.4 25 | 4.7 | 4.9 | 5.1 | 5.4 | 5.7 | 6.0 | | | | | | 26 | 4.5 | 4.7 | 4.9 | 5.1 | 5.4 | 5.7 27 | 4.3 | 4.5 | 4.7 | 4.9 | 5.1 | 5.4 28 | 4.1 | 4.3 | 4.5 | 4.7 | 4.9 | 5.1 29 | 3.9 | 4.1 | 4.3 | 4.5 | 4.7 | 4.9 30 | 3.8 | 3.9 | 4.1 | 4.3 | 4.5 | 4.7 ===========================================================================

Table III. This table is calculated by inversion of the factors in Table I, and is the most useful of all such tables, as it is a direct calculation of the number of years that a given rate of income on the investment must continue in order to amortize the capital (the annual sinking fund being placed at compound interest at 4%) and to repay various rates of interest on the investment. The application of this method in testing the value of dividend-paying shares is very helpful, especially in weighing the risks involved in the portion of the purchase or investment unsecured by the profit in sight. Given the annual percentage income on the investment from the dividends of the mine (or on a non-producing mine a.s.suming a given rate of production and profit from the factors exposed), by reference to the table the number of years can be seen in which this percentage must continue in order to amortize the investment and pay various rates of interest on it. As said before, the ore in sight at a given rate of exhaustion can be reduced to terms of life in sight. This certain period deducted from the total term of years required gives the life which must be provided by further discovery of ore, and this can be reduced to tons or feet of extension of given ore-bodies and a tangible position arrived at. The test can be applied in this manner to the various prices which must be realized from the base metal in sight to warrant the price.

Taking the last example and a.s.suming that the mine is equipped, and that the price is $2,000,000, the yearly return on the price is 10%. If it is desired besides amortizing or redeeming the capital to secure a return of 7% on the investment, it will be seen by reference to the table that there will be required a life of 21.6 years. As the life visible in the ore in sight is ten years, then the extensions in depth must produce ore for 11.6 years longer--1,160,000 tons. If the ore-body is 1,000 feet long and 13 feet wide, it will furnish of gold ore 1,000 tons per foot of depth; hence the ore-body must extend 1,160 feet deeper to justify the price. Mines are seldom so simple a proposition as this example. There are usually probabilities of other ore; and in the case of base metal, then variability of price and other elements must be counted. However, once the extension in depth which is necessary is determined for various a.s.sumptions of metal value, there is something tangible to consider and to weigh with the five geological weights set out in Chapter III.

The example given can be expanded to indicate not only the importance of interest and redemption in the long extension in depth required, but a matter discussed from another point of view under "Ratio of Output." If the plant on this mine were doubled and the earnings increased to 20% ($400,000 per annum) (disregarding the reduction in working expenses that must follow expansion of equipment), it will be found that the life required to repay the purchase money,--$2,000,000,--and 7% interest upon it, is about 6.8 years.

As at this increased rate of production there is in the ore in sight a life of five years, the extension in depth must be depended upon for 1.8 years, or only 360,000 tons,--that is, 360 feet of extension. Similarly, the present value of the ore in sight is $268,000 greater if the mine be given double the equipment, for thus the idle money locked in the ore is brought into the interest market at an earlier date. Against this increased profit must be weighed the increased cost of equipment. The value of low grade mines, especially, is very much a factor of the volume of output contemplated.

CHAPTER VI.

Mine Valuation (_Concluded_).

VALUATION OF MINES WITH LITTLE OR NO ORE IN SIGHT; VALUATIONS ON SECOND-HAND DATA; GENERAL CONDUCT OF EXAMINATIONS; REPORTS.

A large number of examinations arise upon prospecting ventures or partially developed mines where the value is almost wholly prospective. The risks in such enterprises amount to the possible loss of the whole investment, and the possible returns must consequently be commensurate. Such business is therefore necessarily highly speculative, but not unjustifiable, as the whole history of the industry attests; but this makes the matter no easier for the mine valuer. Many devices of financial procedure a.s.sist in the limitation of the sum risked, and offer a middle course to the investor between purchase of a wholly prospective value and the loss of a possible opportunity to profit by it. The usual form is an option to buy the property after a period which permits a certain amount of development work by the purchaser before final decision as to purchase.

Aside from young mines such enterprises often arise from the possibility of lateral extension of the ore-deposit outside the boundaries of the property of original discovery (Fig. 3), in which cases there is often no visible ore within the property under consideration upon which to found opinion. In regions where vertical side lines obtain, there is always the possibility of a "deep level" in inclined deposits. Therefore the ground surrounding known deposits has a certain speculative value, upon which engineers are often called to pa.s.s judgment. Except in such unusual occurrences as South African bankets, or Lake Superior coppers, prospecting for deep level of extension is also a highly speculative phase of mining.

The whole basis of opinion in both cla.s.ses of ventures must be the few geological weights,--the geology of the property and the district, the development of surrounding mines, etc. In any event, there is a very great percentage of risk, and the profit to be gained by success must be, proportionally to the expenditure involved, very large. It is no case for calculating amortization and other refinements. It is one where several hundreds or thousands of per cent hoped for on the investment is the only justification.

OPINIONS AND VALUATIONS UPON SECOND-HAND DATA.

Some one may come forward and deprecate the bare suggestion of an engineer's offering an opinion when he cannot have proper first-hand data. But in these days we have to deal with conditions as well as theories of professional ethics. The growing owners.h.i.+p of mines by companies, that is by corporations composed of many individuals, and with their stocks often dealt in on the public exchanges, has resulted in holders whose interest is not large enough to warrant their undertaking the cost of exhaustive examinations. The system has produced an increasing cla.s.s of mining speculators and investors who are finding and supplying the enormous sums required to work our mines,--sums beyond the reach of the old-cla.s.s single-handed mining men. Every year the mining investors of the new order are coming more and more to the engineer for advice, and they should be encouraged, because such counsel can be given within limits, and these limits tend to place the industry upon a sounder footing of owners.h.i.+p. As was said before, the lamb can be in a measure protected. The engineer's interest is to protect him, so that the industry which concerns his own life-work may be in honorable repute, and that capital may be readily forthcoming for its expansion.

Moreover, by constant advice to the investor as to what const.i.tutes a properly presented and managed project, the arrangement of such proper presentation and management will tend to become an _a priori_ function of the promoter.

Sometimes the engineer can make a short visit to the mine for data purposes,--more often he cannot. In the former case, he can resolve for himself an approximation upon all the factors bearing on value, except the quality of the ore. For this, aside from inspection of the ore itself, a look at the plans is usually enlightening. A longitudinal section of the mine showing a continuous shortening of the stopes with each succeeding level carries its own interpretation.

In the main, the current record of past production and estimates of the management as to ore-reserves, etc., can be accepted in ratio to the confidence that can be placed in the men who present them. It then becomes a case of judgment of men and things, and here no rule applies.

Advice must often be given upon data alone, without inspection of the mine. Most mining data present internal evidence as to credibility. The untrustworthy and inexperienced betray themselves in their every written production. a.s.suming the reliability of data, the methods already discussed for weighing the ultimate value of the property can be applied. It would be possible to cite hundreds of examples of valuation based upon second-hand data. Three will, however, sufficiently ill.u.s.trate. First, the R mine at Johannesburg.

With the regularity of this deposit, the development done, and a study of the workings on the neighboring mines and in deeper ground, it is a not unfair a.s.sumption that the reefs will maintain size and value throughout the area. The management is sound, and all the data are given in the best manner. The life of the mine is estimated at six years, with some probabilities of further ore from low-grade sections. The annual earnings available for dividends are at the rate of about 450,000 per annum. The capital is 440,000 in 1 shares. By reference to the table on page 46 it will be seen that the present value of 450,000 spread over six years to return capital at the end of that period, and give 7% dividends in the meantime, is 4.53 x 450,000 = 2,036,500 440,000 = 4 12_s_.

7_d_. per share. So that this mine, on the a.s.sumption of continuity of values, will pay about 7% and return the price. Seven per cent is, however, not deemed an adequate return for the risks of labor troubles, faults, d.y.k.es, or poor patches. On a 9% basis, the mine is worth about 4 4_s_. per share.

Second, the G mine in Nevada. It has a capital of $10,000,000 in $1 shares, standing in the market at 50 cents each. The reserves are 250,000 tons, yielding a profit for yearly division of $7 per ton. It has an annual capacity of about 100,000 tons, or $700,000 net profit, equal to 14% on the market value. In order to repay the capital value of $5,000,000 and 8% per annum, it will need a life of (Table III) 13 years, of which 2-1/2 are visible. The size of the ore-bodies indicates a yield of about 1,100 tons per foot of depth. At an exhaustion rate of 100,000 tons per annum, the mine would need to extend to a depth of over a thousand feet below the present bottom. There is always a possibility of finding parallel bodies or larger volumes in depth, but it would be a sanguine engineer indeed who would recommend the stock, even though it pays an apparent 14%.

Third, the B mine, with a capital of $10,000,000 in 2,000,000 shares of $5 each. The promoters state that the mine is in the slopes of the Andes in Peru; that there are 6,000,000 tons of "ore blocked out"; that two a.s.says by the a.s.sayers of the Bank of England average 9% copper; that the copper can be produced at five cents per pound; that there is thus a profit of $10,000,000 in sight. The evidences are wholly incompetent. It is a gamble on statements of persons who have not the remotest idea of sound mining.