NEW ZEALAND GOLDFIELDS

Greymouth Evening Star, Volume XXXI, 28 September 1901, Page 4

NEW ZEALAND GOLDFIELDS

Mr. Warden Hawkins’ Report on

the District.

(Continued.)

The dredge? now at work have furnished experience of great value to other companies, and I am sure that no better words could be put up as a warning in every dredging company’s ollicc than Shakespeare’s, “Wisely and slow: they stumble that run fast.” Some dredging ■companies have gone or are going into liquidation—some happily at no greater cost to their shai eholders than that of their preliminary expenses, and a year’s expenses of general management; others will have to face the loss of all their capital beyond what they may be able to recover by sale of their dredges. Hut all tin's tends to a survival of the fittest, and to warn the investing public against rash and hasty enterprise. There remains the solid basis of a valuable industry when the conditions of success have been better studied and complied with.

I have to deal with a matter of considerable importance to subscribing shareholders and to promoters and holders of paid-up shaves. In the term “ promoter ” I must, to avoid prolix repetition, include the original licensee, of a prospecting license or special claim ; the vendor of the claim to a promoter or the company, and the promoter or promoters who float the company, and if he acts in the matter whether directly as promoter or not; and the broker who places the shares —the singular “ promoter ” to include the plural “ promoters.” Parliament made last session, in “ The Companies Act Amendment Act, 1900,” an effort to control the power of “ the promoter ” which he exercised under his fally-paid-up shares, but by subsection (3) of section 2 the whole intention of the Legislature is made purely illusory. That subsection is as follows: “ Shares given in lieu of cash in payment for any properly acquired by the company shall not be deemed to be promoters’ shares within the meaning of this section.” It surely is clear that the promoter has only to make his contract for cash, or, if the company see fit, the equivalent in fully paid shares taken at par in lieu thereof, to escape the provisions of the statute. If Parliament is seriously desirous to protect the contributing shareholders it will bo necessary to introduce much firmer and more decisive legislation. To justify this a short survey of the whole conditions of the property deal with and the relation of the “ promoter ” to the State and the company is necessary. Ido not say that at present I am in possession of data sufficient for my purpose. It is not my intention to urge crude legislation. I think it may be quite desirable for tbo Government to issue a Commission to, say, three persons of proved judicial qualifications to take evidence in the two chief centres of mining business—viz, Auckland and Dunedin—and to await their report. The Commission may be very inexpensive in every way, and the report ot such persons as I suggest would yield a valuable basis for legislation.

I have had little experience of quartzreef mining and ray remarks must be taken to bo chiefly applicable to the sluicing and dredging industries, though I believe that the Auckland capitalists were compelled to take an analagous course to that I recommend for statutory enactment to protect themselves; but meantime, and guarding myself by expressly admitting the inadequacy of material, I think there are just grounds for the intervention of the Legislature. There is no question that a considerable number of claims arc floated which will never pay the shareholders’ interest on the capital which they have subscribed, and many more which will never repay the capital invested. In whose interest and by what means are these claims floated? I think it cannot be disputed that the persons most interested arc the “ promoters.” It is very true that not all persons take shares in companies without making the least attempt to ascertain the value of the property, sometimes on the mere chatter of quite irrespohsiblo 'touters, often on the recommendation of peorsns interested in floating it, and in many cases on the reports of the expert - only. I refer to bona fide investors, not to persons merely buying shares with a view to a quick profit on, a rise, and whom Ido not pretend to protect. It. seems to me that such bona fide investors are fairly entitled to all reasonable protection by the State. Parliament has already recognised this, as I have said, in the Act of 1900, but I may besides point out why I think that special controlling legislation is justifiable in case of these mining companies. The mining privilege is the creature of the. State. It is granted out of the estates of the Crown. It is the foundation of a special industry regulated by Act of Parliament. It is most injurious to the common welfare that the possession of these mining privileges should be abused; that, instead of proving the foundation of a solid and healthy industry of sound;commercial value, they should be perverted for the mere creation of paper scrip, and the gambling of the Stock Exchange under the fever and excitement of a factitious boom which, when it collapses, involves in the disaster many varied interests and many innocent, though not the most prudent persons, and paralyses the industry itself.

There are certain facts within the experience of all persons which generally fovern the acquisition of claims and the oating of a company to work them; and, subject to exceptions, I think it may he recognised as a fact that the general run of properties and formation of companies is as folows; A man pegs out, say, 100 acres that the as a prospecting area, at the cost now of some four wooden pegs and, say, half a day’s labour. He gets one or two experts to make a few holes in and a report on the claim. If he is not in a position to float it himself he applies to some one who is—probably a broker, The prospectus is got out, provisional directors secured, brokers, solicitors, and bankers named. Up to that point the expenses incurred by the “promoter” arc piobably less than £3O to £4O. I have before me the reports of ten companies, and I find from them that the amount of expenses paid in cash by the several companies for preliminary expenses average £2(59. That covers brokers’ commission on flotation, cost of special-claim license, &c., apparently all cash expenses of the acquisition of the claim, and the floating of the company. If I am correct in this, then the “promoter ” acquires from the contributing shareholders paid-up shares in the company tb a largo amount. What this is, is shown by an average of 102 companies in my returns A and B, where paid-up shares are 238,100, out of a share capital of £1,028,975, or rather over a fourth of the entire capital. The lowest amount I find from the returns is £6OO m paid-up shares; the highest £6,000. That practically is the “ promoter's ’’ estimate of the value of a property which he acquired for nothing from the State, for his expenses, if I am right in my supposition, arc always fixed to be paid in cash. It is not as if any great amount of exploration or skill or experience had been used. The pegging-out of tbc.se claims has, with, certain exceptions, been the most careless, reckless work. It bas been a race as to who could peg out ground quickest, anywhere and everywhere. My returns for last year show this, where from the 31st March, 1899, to

the 31st May, 1900, there were 919 claims taken up, including 67,342 acres. It is, I think, apparent that the whole burden lies on the contributing shareholders. They pay all the “ promoter’s ” expenses. They pay for all the machinery of the company. They pay for all the information and surveys, the boring necessary to assure them whether the claim is profitably workable or not. While the “ promoter ” stands by, as is said, “on velvet,” lie lias bis property proved and worked at the cost of tbo contributing shareholders. The utmost, it seems to me, that can be said is that if the company arc unwilling to go on with the venture the license should be handed back to the “ promoter.” (To be continued.)