CHAPTER X
COMPANY FORMATION AND OPERATIONS
All the world over, the operation of winning from the soil and rendering marketable the many valuable ores and mine products which abound is daily becoming more and more a scientific business which cannot be too carefully entered into or too skilfully conducted. The days of the dolly and windlass, of the puddler, cradle, and tin dish, are rapidly receding; and mining, either in lode or alluvial working, is being more generally recognised as one of the exact sciences. In the past, mining has been carried on in a very haphazard fashion, to which much of its non-success may be attributed.
But the dawn of better days has arrived, and with the advent of schools of mines and technical colleges there will in future be less excuse for ignorance in this most important industry.
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 can hardly be said to be more subject to unpreventable vicissitudes than, say, pastoral pursuits, in which private individuals risk, and often lose or make, enormous sums of money.
However, it is with Mining Companies we are now dealing, and with the errors made in the formation and after conduct of these Associations.
The initial mistake most often made is that sufficient working capital is not called up or provided in the floating of the Company. Promoters trust to get sufficient from the ground forthwith to ensure further development; the consequence being that, as nearly 99 per cent of mining properties require a very considerable expenditure of capital before permanent profits can be relied on, the inexperienced shareholders who started with inflated hopes of enormous returns and immediate dividends become disheartened and forfeit their shares by refusing to pay calls, and thus many good properties are sacrificed. 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 some self-styled mining expert, often a man, who, like the schoolmaster of the last century, has qualified for the position by failing in every other business he has attempted. 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, etc.; 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.