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 assist 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 pass 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 classes 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 ownership 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 class 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-class 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 ownership. 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 constitutes 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.