Evening star., 1933-09-04
BY A. ID. WATTS.


Special Dispatch to The Star
NEW YORK, September 4 (NANAD
President Roosevelt's authorizing the
United States Treasury to pay the
world price for American produced
gold, less charges, should materially
assist in speeding up recovery from
the depression in the United States
particularly if carried to its logical
the extraction of gold which until to-
day could not be profitably mined
This has been proved in Canada
during the last two years. Since Sep
tember. 1881. Canadian companies
have been receiving a premium On
gold-equivalent during 1892 to about
IL per cent on the former price OF
$2067 an ounce. and to about 20 per
cent in the first six months of 1888.
At present the premium there is around
so per cent.
1t is a recognized fact that in this
period the increased demand in Canada
for labor, mining and milling equip
ment. mining supplies, consumption of
power, and more freight haulage has
resulted largely from increased pro-
duction of gold as an effect of this
premium.
Another result has been the estab-
iishment of Canada as the second
largest gold-producing nation in the
world, factor regarded as vital in
enabling the Dominion to weather the
depression as well as she did. Canada
today is well advanced on the road to
recovery. thanks too her gold mines.
The importance of her gold production
may be more quickly visualized when
it is appreciated that the annual out
put of gold is approximately equal to
her legal gold reserve.
Will Get World Price.
Gold. in the world markets. is cur
rently priced around s28 an ounce, in
American funds. Hitherto. the Ameri-
can miner has been receiving the
Treasury price of only S20.67 an ounce.
Obviously he now will receive the
world price for gold. which means that
the value of his product has increased
and will increase nearly 40 per cent
further.
Not only will this exercise its effect
upon the value of the ore he is mining
now, but it elevates the grades of ore
that he could not previously treat to
a profitable grade 1t is generally
of low grade ores in the United States
which can now be mined at a profit
where facilities already are available
But before any large number of
new enterprises can engage upon the
extraction of gold from low grade ore
on a commercially profitable basis, some
assurance should be given by the Gov
ernment that a minimum premium
will be sustained over the next few
years. Possibly some action will be
taken along lines already formulated.
and functioning, to afford employment
by mining proved loW-grade ore bodies.
1t should be clearly understood that
the increased price being received by
the American miners is simply the
amount of depreciation of the Ameri-
can dollar from the gold dollar. In
the same way. the Canadian mines are
receiving a premium in Canadian dol
lars; the South African mines
premium in the pound sterling. How
ever, it should be remmbered that
the operating expenses of the mining
industry in each of these important
gold-producing countries are all paid
in the currency of those countries and
for practical purposes are benfiting to
the full amount of the premium.
The thought has been expressed in
some circles that possibly if the Gov
eminent program is successful in rails
the raising cost of materials and labor
may encroach upon this premium to
a material extent A study of condi-
tionS in Canada, however, reveals that
inasmuch as labor and power form the
major coSt-ltemS in mining, and both
are fairly well established and constant
the miners would not experience more
than Is per cent rise in costs even
were the 1926 objective attained.
Virtually All Profit.
The premium on their mined gold
that the producers will receive be-
comes practically all net profit, as there
are little, or no, added costs in the
sale of the product and but small
increase indicated in operating ex-
penses. At first thought, the average
investor might conceive that this
means sharp upSWing in earnings. to
be translated into rising dividend pay
mentS. This added profit, however,
probably will not be apparent in the
immediate future. either in the form
of large increases in net earning in
balance sheets, or increases in divi-
dends paid for the following reasons:
First, that conservative mine man
agements will follow the Canadian
practice of extracting their low-grade
Olc Willie IL CdIl Uc IldllQleu III profit,
thus enabling them to build up a
backlog of high-grade reserves.
Secondly, the miners can carry out
underground development plans on a
larger scale and increase both mine
and milling capacity.
Third, they will be enabled to build
up large cash reserves so that dividends
may be continued over long perioS
of years.
The real mining investors, whose
numbers are increasing annually,
should be encouraged because of the
steady increase in the value of their
equity, and that in due course they
should receive the premium in the
form of dividends.
Gold is urgently required by those
countries which are off the gold stand
ard, for they naturally desire to get
back on to it again, and also by
countries on the gold standard which
are desirouS of maintaining their po-
sition. Thus the miner has some real
assurance of constant market for a
commodity which is not over-produced
The general effect will probably be
a widespread revival of interest in gold
mining throughout the United States,
with the resultant Unemployment of
tens of thousands of men. Gov. Rolph
of California has been quoted as be-
lieving that between 100000 and 300, 900
men could be gainfully employed in
the gold areas of that State alone.
1t has even been thought possible, in
some quarters, to employ men in gold
recovery along the same lines as the
Civilian Conservation Corps is now
building up American forest reserves.
Gold mines, as a rule, employ three
shifts daily.
Mines Will Reopen.
Many of the smaller mines and hum
dreds of new ones might be brought
into production under the supervision
of the numerous mining experts avail
able, who could start actual operations