Bands of swindlers repair to mining camps and establish branches there. They expend a few hundred dollars for shreds and patches of ground void of present or prospective value.
They then form a mining corporation, place its capital stock at some enormous figure—a million, two or three million dollars—appoint themselves or some of their confederates, or even their dupes, directors, and sell the worthless claims to the company for a large proportion, or perhaps, all of the capital stock of the company.
The stock must be disposed of with a rush. It must all go within a year or shorter time. When it is gone the suckers who get the stock for good money may take the property of the company. They always find an empty treasury, worthless claims, and the rosy pictures that led them astray, smothered in the fog.
During the last five years the advertising columns of leading newspapers have been full of offers of mining stocks as "sure roads to fortune." Nearly all of these mining companies, into whose treasuries the public has paid millions, have either been abandoned or the properties have been sold for debts, and invariably they bring very little. The major portion of receipts of these companies from the sales of stock is stolen by their promoters.
Official statistics of the mining industry show that out of each one hundred mines, only one has become a success from a dividend-paying point of view. About five earn a bare existence, while the balance turn out utter failures.
Promoter's Word Valueless.
Investors will do well to consider that stocks of mines which are only prospective are the most risky form of gambling. In buying stocks of the undeveloped mines offered to the public on the strength of statements the only substance of which is the imagination of promoters, one runs up against a sure-thing brace game.
Don't take the promoter's word for it. When you wish to place money where it can work for you, don't bite at the first "good thing" you see advertised. It is to the interest of the man who wants to sell you stock to place it before you in the rosiest light. Otherwise he knows you would not buy it. If you want to buy stock, don't rely upon what the seller says, but consult others.
Before consulting persons whom you think may be able to express an honest and intelligent opinion, ask the promoter to furnish you a statement of the condition of the company, showing its assets and liabilities, profits and losses, and an accurate description of its property.
You will then be able to judge whether the company is over-capitalized; whether it is incumbered with debts (for debts may lead to a receivership), and if its earnings may lead to permanent dividends.