Advice must often be given upon data alone, without inspection of the mine. Most mining data present internal evidence as to credibility. The untrustworthy and inexperienced betray themselves in their every written production. Assuming the reliability of data, the methods already discussed for weighing the ultimate value of the property can be applied. It would be possible to cite hundreds of examples of valuation based upon second-hand data. Three will, however, sufficiently illustrate. First, the R mine at Johannesburg. With the regularity of this deposit, the development done, and a study of the workings on the neighboring mines and in deeper ground, it is a not unfair assumption that the reefs will maintain size and value throughout the area. The management is sound, and all the data are given in the best manner. The life of the mine is estimated at six years, with some probabilities of further ore from low-grade sections. The annual earnings available for dividends are at the rate of about £450,000 per annum. The capital is £440,000 in £1 shares. By reference to the table on page 46 it will be seen that the present value of £450,000 spread over six years to return capital at the end of that period, and give 7% dividends in the meantime, is 4.53 x £450,000 = £2,036,500 ÷ 440,000 = £4 12s. 7d. per share. So that this mine, on the assumption of continuity of values, will pay about 7% and return the price. Seven per cent is, however, not deemed an adequate return for the risks of labor troubles, faults, dykes, or poor patches. On a 9% basis, the mine is worth about £4 4s. per share.
Second, the G mine in Nevada. It has a capital of $10,000,000 in $1 shares, standing in the market at 50 cents each. The reserves are 250,000 tons, yielding a profit for yearly division of $7 per ton. It has an annual capacity of about 100,000 tons, or $700,000 net profit, equal to 14% on the market value. In order to repay the capital value of $5,000,000 and 8% per annum, it will need a life of (Table III) 13 years, of which 2-1/2 are visible. The size of the ore-bodies indicates a yield of about 1,100 tons per foot of depth. At an exhaustion rate of 100,000 tons per annum, the mine would need to extend to a depth of over a thousand feet below the present bottom. There is always a possibility of finding parallel bodies or larger volumes in depth, but it would be a sanguine engineer indeed who would recommend the stock, even though it pays an apparent 14%.
Third, the B mine, with a capital of $10,000,000 in 2,000,000 shares of $5 each. The promoters state that the mine is in the slopes of the Andes in Peru; that there are 6,000,000 tons of "ore blocked out"; that two assays by the assayers of the Bank of England average 9% copper; that the copper can be produced at five cents per pound; that there is thus a profit of $10,000,000 in sight. The evidences are wholly incompetent. It is a gamble on statements of persons who have not the remotest idea of sound mining.
GENERAL CONDUCT OF EXAMINATION.
Complete and exhaustive examination, entailing extensive sampling, assaying, and metallurgical tests, is very expensive and requires time. An unfavorable report usually means to the employer absolute loss of the engineer's fee and expenses. It becomes then the initial duty of the latter to determine at once, by the general conditions surrounding the property, how far the expenditure for exhaustive examination is warranted. There is usually named a money valuation for the property, and thus a peg is afforded upon which to hang conclusions. Very often collateral factors with a preliminary sampling, or indeed no sampling at all, will determine the whole business. In fact, it is becoming very common to send younger engineers to report as to whether exhaustive examination by more expensive men is justified.
In the course of such preliminary inspection, the ore-bodies may prove to be too small to insure adequate yield on the price, even assuming continuity in depth and represented value. They may be so difficult to mine as to make costs prohibitive, or they may show strong signs of "petering out." The ore may present visible metallurgical difficulties which make it unprofitable in any event. A gold ore may contain copper or arsenic, so as to debar cyanidation, where this process is the only hope of sufficiently moderate costs. A lead ore may be an amorphous compound with zinc, and successful concentration or smelting without great penalties may be precluded. A copper ore may carry a great excess of silica and be at the same time unconcentratable, and there may be no base mineral supply available for smelting mixture. The mine may be so small or so isolated that the cost of equipment will never be justified. Some of these conditions may be determined as unsurmountable, assuming a given value for the ore, and may warrant the rejection of the mine at the price set.
It is a disagreeable thing to have a disappointed promoter heap vituperation on an engineer's head because he did not make an exhaustive examination. Although it is generally desirable to do some sampling to give assurance to both purchaser and vendor of conscientiousness, a little courage of conviction, when this is rightly and adequately grounded, usually brings its own reward.
Supposing, however, that conditions are right and that the mine is worth the price, subject to confirmation of values, the determination of these cannot be undertaken unless time and money are available for the work. As was said, a sampling campaign is expensive, and takes time, and no engineer has the moral right to undertake an examination unless both facilities are afforded. Curtailment is unjust, both to himself and to his employer.
How much time and outlay are required to properly sample a mine is obviously a question of its size, and the character of its ore. An engineer and one principal assistant can conduct two sampling parties. In hard rock it may be impossible to take more than five samples a day for each party. But, in average ore, ten samples for each is reasonable work. As the number of samples is dependent upon the footage of openings on the deposit, a rough approximation can be made in advance, and a general idea obtained as to the time required. This period must be insisted upon.