THE STORY OF ELY CENTRAL
By keeping speculators out of stocks that were selling at inflated prices, the Scheftels corporation and the Mining Financial News became endeared to a great popular moneyed element. The public was saved huge sums of money.
This, however, only carried out the negative end of a grand idea. The affirmative demanded that the Scheftels corporation must put its followers into a stock or stocks where they could actually make money.
The Scheftels corporation was on the eager lookout for a genuinely high-classed copper-mining proposition. It found what it was looking for in Ely Central, a property that is sandwiched in between the very best ground of the Nevada Consolidated, is bordered by the Giroux and occupies a strategic position in the great Nevada copper camp of Ely, birthplace of what is probably the greatest lowest-cost porphyry copper mine of America.
By invading the Ely territory as promoter and annexing Ely Central, the Scheftels corporation committed what was probably, to the interests among whom our publicity work had wrought greatest havoc, an unpardonable crime. We butted into the very heart of the game, and became a disturbing factor in their mining operations.
The Ely Central property consists of more than 490 acres. Years before, in the early days of the camp, it had been passed over by the geologists and promoters who selected the ground for the Nevada Consolidated, Giroux and Cumberland-Ely, because it was covered by a non-mineralized formation called rhyolite. As development work progressed and the enormous value of the surrounding mines was disclosed, it dawned on their owners that they might have made a mistake and that it would be just as well to obtain possession of the Ely Central property.
The ground was especially valuable to the Nevada Consolidated, if for no other reason, as mere acreage to connect up and make compact the properties owned by them. The second demonstration of their bad judgment was the fact that, having planned to mine the Copper Flat ore-body by the steam-shovel method, they overlooked the value of the Ely Central property as affording them the only practical means of access to the lower levels of that pit for operation by the steam shovels.
Investigation had disclosed to me that the evidence which had been adduced by mine developments on neighboring properties was all in favor of copper ore underlying the Ely Central area. The rhyolite, which covered Ely Central, was a "flow," covering the ore, and not a "dyke," coming up from below and cutting it off.
Why was the property idle? Inquiry revealed that the Ely Central Copper Company was $89,000 in debt, and that a pre-panic effort to finance the corporation for deep mine development had failed. The panic of 1907-8 had crimped the promoters and they could not go ahead.
The Scheftels corporation entered into negotiations with the Pheby brothers and O. A. Turner, who held the control, for all the stock of the Ely Central company that was owned by them. During the progress of negotiations, early in July, 1909, I heard that the Guggenheims and W. B. Thompson were very much put out to learn that the Scheftels company was about to finance the company. They had belittled the value of the property, as would-be buyers are prone to do the world over.
Before I entered upon the scene the Pheby brothers had found themselves objects of persistent and mysterious attacks. Their credit was assailed in every quarter and they found themselves ambushed and bushwhacked in every move they made. They were forced into a position where it was believed they would accept anything that might be offered them for their interest in Ely Central. As fate would have it, the Scheftels company entered the race at this psychological moment.
Summed up, the Scheftels company actually contracted for 1,280,571 shares out of 1,600,000, which represented the increased capitalization for a total sum of $1,158,916, or at an average price of 90½ cents per share. The time allowed for the payment of all the money was nine months, stipulated payments being agreed upon at regular intervals in between. The immediate effect of the arrangement was this: A dormant property, in debt and lying fallow, was metamorphosed into a going concern with good prospects of soon becoming a proved great copper mine, with an assured income to defray the expenses of deep mine development on a large scale, and a market career ahead of it that might be expected to match any that had preceded it in the Ely district from the standpoint of public interest.
During the progress of the negotiations the stock sold up to $1 per share. The selling for Philadelphia account of a large block of stock in the open market dropped the price back, of a sudden, to 50 cents. The Scheftels company bought stock on this break and urged its customers to do likewise. On the day the deal was concluded the market had rallied to 75 cents. Fully six weeks before the deal was arranged the Scheftels Market Letter and the Mining Financial News had begun to urge the purchase of the stock. The Scheftels organization was not hoggish. The establishment was willing that the public should get in on the cellar floor. There were nearly 300,000 shares outstanding, which the Scheftels corporation had not corralled in its contract.
Readers of the Market Letter and the Mining Financial News fell over one another to get in on the good thing. Therein they were wise. By early September the price had advanced in the market to $1. The Scheftels publicity was strong in favor of the stock. But it had not yet put on full steam. It was waiting for an engineer's report to make doubly sure it was right.
Col. Wm. A. Farish, a mining engineer of many years' experience and a man with a high reputation throughout the whole of the Western mining country, had been sent by the Scheftels company to make a report on the Ely Central. Years before Colonel Farish had reported on the Nevada Consolidated properties and outlined the very methods now being used for recovering its ores. But Colonel Farish had been ahead of his time, and the capitalists in whose interest he was acting were not prepared for such a radical step in advance of the then-existing methods, nor to believe that copper ores of such low grade could be mined at a profit, especially 140 miles from the nearest railroad. Times and conditions changed, and the 140 miles were spanned by a well-equipped rail connection.
Colonel Farish's opinion verified our fondest expectations. The report set forth that the mine possibilities of Ely Central were nearly as great as those of the Nevada Consolidated itself. On the basis of this report, which was made in September, the project acquired a new significance. Development operations were undertaken to prove up the ground in an endeavor to demonstrate the existence of the 33,000,000 tons of commercial porphyry ore which Colonel Farish indicated in his report would likely be found within the boundaries of the southern part of the Ely Central property.
The prospect fairly took the Scheftels organization off its feet. We were dazzled. We saw ourselves at the head of a mine worth $25,000,000 to $40,000,000. No time was lost in organizing a campaign to finance the whole deal. Having no syndicated multi-millionaires to back it up, the Scheftels corporation went to the public for the money, the same as hundreds of other notable and successful promoters had done. The ensuing publicity campaign to raise capital has been described in hundreds of columns of newspaper space as one of the most spectacular ever attempted in Wall Street.
I had absolute faith in the great merits of Ely Central, a faith that has not been dimmed in the slightest degree by the vicissitudes through which the company, the Scheftels corporation, and myself personally have passed. Within thirteen months the Scheftels corporation caused to be spent for mine development more than $150,000, and on mine and company administration an additional $75,000. When the Scheftels company was raided by the Government on September 29, 1910, and a stop put to further work the expenses at the mine had averaged for the nine months of that year above $15,000 a month. Work was going on night and day. Every possible effort was being made to prove-up the property in short order. Core-drills sent down from the surface had already revealed the presence of ore at depth, and I am sublimely certain that another month or two would have put the underground air-drills into contact with a vast ore-body identical in quality and value with that lying on either side in Nevada Consolidated acreage.
Ely Central was the New York Curb sensation in 1909-1910. I used the publicity forces which had been so successful in protecting the public against the rapacity of multi-millionaire mining-wolves to educate them up to the speculative possibilities of Ely Central.
Up went the price. Between the first of September and the middle of October the market advanced to $2 3-8. On October 13th advices reached us that 30 per cent. copper ore had been struck in the Monarch shaft. The Monarch is an independent working, far removed from the area that is sandwiched in between the main ore-bodies of the Nevada Consolidated. We were highly elated. The prospect looked exceedingly bright to us, and there was no longer any hesitation in strongly advising our following to take advantage of an unusually attractive speculative opening.
The market boomed along in a most satisfactory way. By October 26th the price reached $3; on November 3d it was $4 a share, and three days thereafter $4¼ was paid.
The expenses of the Scheftels company on publicity work at this time amounted to about $1,000 a day. Money for mine development on Ely Central was being spent as fast as it could be employed. We were trying to sell enough stock at a profit over the option price to defray the publicity expenses, keep the mine financed, and meet our payments on the option, but no more. We were not making any effort to liquidate on a large scale, a fact which was reflected in the advancing quotations.
When the price of Ely Central hit $4 in the market, the Scheftels company rated itself as worth from $3,000,000 to $4,000,000. I had visions of leading the Guggenheims and Lewisohns and Thompsons up the Great White Way with rings in their noses. Nat. C. Goodwin, who had a 25 per cent. interest in the Scheftels enterprise, enjoyed similar visions, only his fancy ran to building new theaters for all-star casts.
While Ely Central stock was going skyward and all the speculating world was making money in it, our publicity forces were busily driving the bald facts home regarding La Rose, Cumberland-Ely, Nevada-Utah and other pets of the mighty. Our batteries never let up for a moment. These various attacked interests were getting ready to strike back. If their movements had been directed by an individual general they could not have worked with more community of interest. One day the sky fell in on us. The plans had been beautifully laid for our complete ruin. That we escaped utter annihilation was almost a miracle.
On Wednesday, November 3d, the result of our market operations on the New York Curb was that we quit long on the day nearly 8,000 shares of Ely Central at an average price of $4. On the same day our customers ordered the purchase of nearly twice as much stock as they ordered sold. This indicated to us that the Curb selling was professional. There was nothing very remarkable about this performance because brokers doing business on the Curb very frequently play the market for a fall.
On Thursday, the day following, the Scheftels company was again compelled to purchase stock on the Curb in excess of sales to the extent of 7,600 shares, while on the same day the buy orders of house customers exceeded their orders to sell at least three to one. The professional selling was now accompanied by rumors on the Curb which spread like the smell of fire that trouble of some dire sort was pending for the Scheftels company. Most of this emanated from an embittered brokerage quarter and we paid little attention to it.
On the succeeding day, Friday, November 5th, the professional selling was quieted to a point that compelled the Scheftels company to go long of only 6,600 shares on the day in its Curb market operations. The purchase of so small a block of stock excited no suspicion in the Scheftels camp, although it should have, because Scheftels' customers on this day purchased more than four times as much stock as they ordered sold, pointing conclusively to a great public demand and much shorting by professionals.
Then came the coup de main.