The Business of Mining / A brief non-technical exposition of the principles involved in the profitable operation of mines

by Arthur J. Hoskin

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."