Getting Gold: A Gold-Mining Handbook for Practical Men

by J. C. F. Johnson

This chapter will be devoted to Company formation and working, in which mistakes leading to very serious consequences daily occur.

It is not necessary to go deeply into the question why, in the mining industry more than any other, it should be deemed desirable as a general rule to carry on operations by means of public Companies, but, as a matter of fact, few names can be mentioned of men who mine extensively single handed. Yet, risky as it is, mining is hardly more so than, say, pastoral pursuits, in which private individuals risk, and often lose or make, enormous sums of money.

In floating Mining Companies the first mistake usually made is not providing sufficient working capital for meeting all necessary expenses until permanent profits are realisable. This neglect has caused the sacrifice of many good properties. In England, the Companies are often floated fully paid up, but the same initial error of providing too little money for the equipment and effective working of the mine is usually fallen into.

Again, far too many Companies are floated on the report of plausible, ignorant individuals posing as mining experts. These men acquire a few geological and mining phrases, and by more or less skilfully interlarding these with statements of large lodes and big returns they supply reports seductive enough to float the most worthless properties and cause the waste of thousands of pounds. But the trouble does not end here.

When the Company is to be formed, some lawyer, competent or otherwise, is instructed to prepare articles of association, rules, &c., which, three times out of four, is accomplished by a liberal employment of scissors and paste. Such rules may or may not be suited to the requirements of the organisation. Generally no one troubles much about the matter, though on these rules depends the future efficient working of the Company, and sometimes its very existence.

Then Directors have to be appointed, and these are seldom selected because of any special knowledge of mining they may possess, but as a rule simply because they are large shareholders or prominent men whose names look well in a prospectus. These gentlemen forthwith engage a Secretary, usually on the grounds that he is the person who has tendered lowest, to provide office accommodation and keep the accounts; and not from any particular knowledge he has of the true requirements of the position.

The way in which some Directors contrive to spend their shareholders’ money is humorously commented on by a Westralian paper which describes a great machinery consignment landed in the neighbourhood of the Boulder Kalgoorlie.

“It would seem as if the purchaser had been let loose blindfold in a prehistoric material founder’s old iron yard, and having bought up the whole stock, had shipped it off. The feature of the entire antediluvian show is the liberal allowance of material devoted to destruction. Massive kibbles, such as were used in coal mines half a century ago, are arranged alongside a winding engine, built in the middle of the century, and evidently designed for hauling the kibbles from a depth of 1000 feet. Nothing less than horse power will stir the trucks for underground use, and their design is distinctly of the antique type. The engine is built to correspond—of a kind that might have served to raise into position the pillars of Baalbec, and the mass of metal in it fairly raises a blush to the iron cheek of frailer modern constructions. The one grand use to which this monster could be put would be to employ it as a kedge for the Australian continent in the event of it dragging its present anchors and drifting down south, but as modern mining machinery the whole consignment is worth no more than its value as scrap-iron, which in its present position is a fraction or two less than nothing.”

Next a man to manage the mine has to be obtained, and some one is placed in charge, of whose capabilities the Directors have no direct knowledge. Being profoundly ignorant of practical mining they are incompetent to examine him as to his qualifications, or to check his mode of working, so as to ascertain whether he is acting rightly or not. All they have to rely on are some certificates often too carelessly given and too easily obtained. Finally, quite a large proportion of the allottees of shares have merely applied for them with the intention of selling out on the first opportunity at a premium, hence they have no special interest in the actual working of the mine.

Now let us look at the prospects of the Association thus formed. The legal Manager or Secretary, often a young and inexperienced man, knows little more than how to keep an ordinary set of books, and not always that. He is quite ignorant of the actual requirements of the mine, or what is a fair price to pay for labour, appliances, or material. He cannot check the expenditure of the Mining Manager, who may be a rogue or a fool or both, for we have had samples of all sorts to our sorrow. The Directors are in like case. Even where the information is honestly supplied, they cannot judge whether the work is being properly carried out or is costing a fair price, and the Mining Manager is left to his own devices, with no one to check him nor any with whom he can consult in specially difficult cases. Thus matters drift to the almost certain conclusion of voluntary or compulsory winding up; and so many a good property is ruined, and promising mines, which have never had a reasonable trial, are condemned as worthless. But let us ask, would any other business, even such as are less subject to unforeseen vicissitudes than mining, succeed under similar circumstances?