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.

[XVI
MINING INVESTMENTS.]

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.