Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1938-10-08

ticipating in the public distribution even
( though he may regard the security faVorably.
4 OF necessity, the promoter is forced often
Z 70 zeal with those comprising the ragged
fringe Of the profession. The little fellow must
/ blindly seek someone to sell his issue. usual
I " through advertisements in the papers. In
I doing so he frequently becomes tangled up
with someone who not only bilks the public
BUT the promoter as well The activities of
this type Of self-styled underwater wen de-
serve the thoughtful attention Of this asgo-
citation to the end that promoters Of Montana
mining properties avoid them. and perhaps
more fundamental that an important step
be taken to quicken the public faith and to
encourage q more general participation IN
distribution Of mining securities BY dealers
who have the equipment and the standing
essential to successful placement Of securities.
Ihis seems TO me to be a field where CO
operation between the state and federal Sc
curittes commission and this association would
result In elimination OF certain factors which
are prejudicial to financing Of small mining
ENTERPRISES
Perhaps in another area the association
could exert influence which would have bene-
fetal results to the small mining enterprise.
Many Of the prospectuses filed under rule 202
and prospectuses contained in registration
statements filed under the securities act re-
veal that the issuer either throush lack Of
good faith or misconception Of its own needs
Is seeking too little or too much money. Ger
tain tssuers whose capital needs are quite
obviously in excess OF the amount obtainable
through 2Oz filing at the most one hundred
thousand dollars, nevertheless proceed under
the provisions OF that rule Naturally the
commission insists that II be clearly stated
in the prospectus that the amount expected to
be received. even though received. will be
insufficient to execute the required program
Of work or 10 put the property on q profitable
producing basis. On the other hand we have
had registration statements whose contents
disclose that the property proposed to be
exploited has SO far had nothing more in
the way Of exploratory work than that which
was done 20 meet assessment requirements |
1t is not uncommon for such issuers to seek /
several million dollars from the public, the /
proceeds being anocated to individual pur- !
poses such as construction Of a 500-ton mill |
mess hall and bunkhouses for q large crew of /
miners. erection OF power transmission lines /
even railroads, none Of which will ever be /
unless the exploration work results /
in the discovery OF commercial ore bodies
Sales resistance necessarily stiffens when the /
public become aware that the issuer seeks /
money for which It has no present and may (
have no future use. Over and above this
frequent disparity between the amount need
ed and the amount sought there is another
factor which no doubt at least in individual
cases makes financing difficult That is the
ing program which is evidenced by claims
obvious lack OF consideration given the min
In the prospectus that 50-ton mill proposed
TO be constructed will cost $500 900 or q 500
ton mill $4,000 Claims Of hundreds of thou
sands of tons Of ore reserves which rest upon
two or three isolated samples convince one
either Of lack of good faith or lack Of
Of mining. The stated willingness
10 construct q large mill even before the
presence of ore is fairly established and the
nature Of the milling problems determined
likewise causes one to question whether the
offers a fair chance for return
0n any money advanced. The reasonably in
.elligent investor Is unwilling to participate.
don't mean to say that these represent the
majority Of mining cases. They do not. Never
.heless, they are numerous enough to cause the
public TO give weight TO them in forming It's
dea OF the character Of promotional mining
securities.
other factors and practices with which
he commission under the securities act has
40 direct concern, nevertheless are things to
le given consideration with the hope Of IA
tlitating the flow Of capital 10 promotional
mining ventures. Instances of exorbitant pro-
noters profits are too numerous. Sales OF pro-
noters stock In competition with sales Of
company securities can have no result other
han TO increase the difficulty Of financing
he enterprise itself. The absence OF pro-
1sions in the charter to assure protection OF
he securities holders position inevitably dis
ouraRes contributions Of capital If partici- .
ations In earnings and management were al
0cated more closely In line with the respective
contributions the difficulties Of financing
lould be reduced. Your association possesses
a unlque opportunity IN this iieid 20 make
contribution to the health and well !
eing Of the mining industry.
An illustration Of the effect requirements ]
disclosure have upon established practices
! the treatment by the commission OF stock !
sued In exchange for property and currently .
onated to the corporation Early in the ad- .
Illustration OF the securities act the position I
Tas taken that the true cost Of assets was s
ne aggregate par value Of the stock issued :
! payment for such assets less the aggregate i
ar amount Of stock donated back to the
by the recipient. The surplus
nown on the balance sheet resulting from 8
1ch transaction was deemed by the COM q
ission to be non-existent, and the repre- .
.ntation Of cost together with the represen-
ition Of possession of surplus were held to 2
; untrue statements Of material facts While {
lis device was q convenient means of salts 4
ring local statutory requirements that stock 3
sued be fully paid the inaccuracy of the I
presentation Of cost and the resulting sur
lus seems quite evident. In reality the trans {
ction Is not unlike the purchase of q shirt 2
clothing store. II hand the clerk a $40
III and he gives me a shirt and IS change 4