The silver state. [volume] (Winnemucca, Nev.) 1909-1925, 1910-11-15
THOUGHTS ON
mining finance

Inc Engineering and Mining Jour
nal Of October 80 has the following
editorial, which is Of western inter
est:
The substantial improvement in the
market for copper and in the general
stock quickly quickly inspired courage
in the ranks of the promoters of new
mining enterprises to invite the pub
lie to contribute the additional sums
required for these undertakings. But
why this never-ending financingf This
is something upon which investors may
pause and reflect.
We have lately seen the Miami COM
pany make it's fourth call for money,
and Braden its third. Inspiration has
just raised $4,000, 900 by sale Of treas
Jury stock and Ray Consolidated is
making q bond issue of 90, O00, 900.
Before long Chino will have to be
financed. Inspiration has raised only
a part Of the money that it will re-
quire and we may reasonably expect
that the history Of Chino will be q
repetition of the experience that be-
gan with Utah Copper company and
Nevada Consolidated.
Why is it that the promoters of
these enterprises do not provide sufi-
cient money in the first placef (1)
Is it that the engineers are incapable
Of estimating accurately the require
mentsf (2) Or are the promoters
afraid to ask at once for the huge sum
that they know will be requireds (3)
Or is the gradual expansion of capital
account really due to progressive en-
largement of plansf OF course the an
swer Of the promoters will be afirma-
tive to the last inquiry. Our own an
swer is affirmative to the three in
quiries, without, however, implying
that all of these conditions exist in
all cases.
We may take the history of Miami
as illustrative of the experience Of
these companies, and in making this
selection we look at the best face of
modern copper financing, inasmuch as
it has been one of the soundest devel-
opments and certainly the most mod
est. When first offered to the public,
100000 shares were sold at SIS per
share. The promoters doubtless rea-
liked that this would fetch insufficient
r,onav ord raJ;oJ rpon cuob Jaya1on
ment of the mine as would enable the
remaining 100000 shares of trasury
stock to be sold at $40 per share. That
was done. Subsequently developments
were so favorable that the manage
ment considered itself justified in in
creasing it's plans from the basis Of
1000 tons per day to 1000 per day.
This necessitated more money and a
bond issue of 81 100000 was made.
The mining and milling of 1000
tons Of ore a day is almost ridiculous
lly modest as things go with the "por-
lphyry mines" However the engineer
ing estimates fell short, largely be-
cause Of the extraordinary sum put
into the underground developments of
the mine, which in fact have antici-
pated future mining costs to a note
worthy extent, and it became neces-
sary to increase the capital Of the com
pany and sell more stock. By the time
that production is inaugurated, the
development and the equipment of
Miami will have cost nearly $4,000 900.
Now we have Inspiration with a CAPT
tai Of 10000 900 shares and 100000
Just received from the sale Of its
treasury stock, planning to build a
milling plant Of 5000 tons daily ca
pacity. For such a capacity, the de-
velopment and equipment may rea-
sonably be expected to cost something
like twice that of the Miami. OBJ
viously, the Inspiration viii later on
be compelled to do more financing.
We refer to this company simply be-
cause it is just starting on the road
that Ray Consolidated has travelled
half way.
We are not going to criticise any
management or group of promoters for
deficiencies in this respect. We shall
simply point out to investors that they
must do their own estimating as to
probable capital requirements. The
promoter estimates that, let us say, he
is going to produce So 900 of cop
per at a profit of 4 cents per pound,
or 100000 per annum, or So per
share if there be 1000, 900 shares. But
if the capitalization is to be increased
to 100000 shares by an issue of con
vertible bonds, or otherwise, the profit
per share will be diluted to $1.60. The
stakeholder needs to know not only
the tonnage, grade and production cost
of the ore, but also how long viii be
Tho time hafore contaminated produc-