GOLD MINING

Hokitika Guardian, 19 October 1932, Page 8

GOLD MINING

INVESTMENT 'POSSIBILITIES. (By J. R. TempUn, Fel. A.1.E.E., A.M.I.E.E. in ! 'Financial Times). The high-price of gold arid the depression througih which we are passing has probably: caused rhore interest to ; be taken in goldmining in New Zealand, to-day than at any time during the past 20 years. At the' present: time the investing public is waiting up to the possibilities of goldmining,' and the tihic is opportune for a few observations- which may be helpful to intending' investors in goldmining shares. Unfortunately the past records of a number of gold mines havef :eaused a large, number of people to be reluctant -to consider investing money' in any gold mine,' irrespective of its- .merits; Throughout the whole of New Zealand new mining propositions are being submitted to thj public, some of which are worthy'of consideration; and some of which are not, and the investor must be able to discriminate between the good and the bad, Some investors will undoubtedly be successful, while others will -lose, and th e latter in consequence will probably say 'that all goldmining is purely a matter of luck.

There are, in general, two types of individuals who buy goldmining shares, t’e speculator who expect Ito make a quick profit out of the fluctuations in the ,-share market, ' irrespective of the merits of the investment, and the real investor, who hopes to obtain' his return 1 from tli'e gold won from the mine; This' article is written for the benefit of the latter class who invest in shares trusting that' the profits from tjhe mine 'vill give a tvgoo’d return by way *of dividends. * . .

FACTORS OF SUCCESS. There are iseveral factors upon which the ’success of a gold mine'depends. First and foremost there must be gold' in sufficient quantity not only to covet all working expenses, but also to make enough profit to ensure payment of dividends and -to provide ample reserves for amortisation, and secondly the mine must efficient and honest administration, that is to say, it must have reliable and efficient mine officials and-a competent and honest directorate. It may- be stated that quite a number 1 of mines have had ample gold but- have been unsuccessful owing to weak and incompetent management. Again' the lack of forking capital has caused many mines to fail. Sometimes the cost of initial development-and of plant has been much under-estimated and'in a few cases mines -have failed owing £o the lack of foresight in recognising the necessity:of keeping sufficient reserves in hand to carry on developing work when a low grade patch of -ground or water trouble was encountered.

TESTING THE. PROPOSITION. -Before any capital is put into a proposition to. carry on mining operations it, is essential that . development or proving work is carried out, for, unless this is -done; ■ the- odds are' all against the investor; It is important to differentiate between mining operations arid development, work as sometimes this point' is-missed by investors. Th© sequence of developing a goklmin e can be summarised a® 1 follows . "

Firstly a prospecting syndicate or company prospects' certain areas supposed’ to be auriferous, and if good prospects are found; bhes e are turned over to a development company whose functions are to prove t)he ■ extent, value,: capital required and cost of operations of th e area under consideration. It can' be seen that the development company is the strongest method of protecting the investor in goldmining -securities. The development company must have the best technical staff available, not only of mining but also of civil, mechanical and electrical engineers so that all branches of-engineer-ing ;in the project- can, when encounu ered, be competently dealt with in a comprehensive manner. Very few rr;ning propositions 'hav e exactly thy same problems to consider and the technical advisers must therefore be men with wide experience. If this company carries out its work honestly and thoroughly and proves that there is sufficient gold in the claim to Hvarrant mining operations, then, when the mining company is formed to work the claim the investor wilier taking very little, if any, risk — providing the management and tlh-o directorate are sound.

It can be seen from the above that th© development company i,s really the one which is taking the risk and if its operations ar e successful, it should be -amply rewarded wh°u the mining company is formed. Therefore, for the individual who likes 'speculation and is prepared to risk his money, his opportunity. ..lies in the development company. X- o •

Development .'companies fliave numerous propositions submitted to them and only -those which appear to have good possibilities ar© seriously considered.

TYPES OF PROPOSITIONS. The amount of development work to be done before mining operations commence, depends upon the capital, required, e.g., with a sluicing claim where the capital, expenditure is small, a relatively small amount of development work is required to prove the value of the TJ„ w over, with say, n dredging proposition requiring a largo amount of capital to construct a modern dredge, the necessity for first thoroughly proving the ground is imperative. A short time ago the writer discussed, with a mining ongiaetf who has carried out mining

operations in various parts of the world, , the question of developing dredging areas. . lie stated that in one placfe he - spent over two years boring and ! testing the ground, after which his firm removed him to a different job ! and had another man .'pend a year checking up his work. After this checking was completed, the company knew tlie extent of the area, and within less than on e penny a yard the value of the ground, and at the present time several large dredges are working successfully on this field. If development work is carried out systematically as shown' in the above example, goldmining becomes not even a speculative investment, but one of the safest. It may be surprising to know that there are very few men in the ; Dominion who are competent to borqi alluvial ground. One mining authority' recently stated to the writer that they could be counted ou th_ fingers of one hand. To bore and test alluvial ground, and obtain accurate results, is a very highly skilled occupation which requires years of experience, and therefore investors should note, when studying a prospectus, who has‘ carried out the boring operations. Tf the individual named in the prospectus has bored ground previously for other companies and the working results have borne out the test figures, the investor can feel more assured than if the boring was done by some unknown person who probably has had probably has little or no experience. If there is any doubt as. to the accuracy of the testing, the-prospective investor will be well advised to leave the proposition alone .

QUARTZ MINES. .With mining companies, the best dividend producers in <ew Zealand have been quartz mines .and some peopl© will-invest in this class of mine only. However it should be pointed out there are old batteries still standing in many mining fields as silent monuments to some venture in quartz mining. Many of the old mining reports of the -Mines Department make instructive reading to anyone interested in reef mining. It appears that when a reef outcrop was found, one of the first jobs was to erect a battery, which in some cases never crushed a t-ori of ore. There is just as much necessity for development work in quartz mining as there i*s for dredging, and it would be absurd to instal a recovery plant before the extent -and value of the reef are proved sufficiently to (warrant the capital outlay. There is another important problem which must be solved with quartz mining, that is the type of plant to be used: and the method required for recovery of the gold. ' -Many records of the old mines show' failure or reduced profits owing to the poor percentage of - gold recovery. Modern mining machinery and methods will overcome this difficulty and any . new company proposing to use. machinery taken' ovei from some old mine do so only upon the advice of a competent urging engineer.

OLD MINES. There is much activity to-day connected with the resuscitation of a number of ‘old 'mines, but before resuming work in any of the'-e fields it is necessary, to carry out very careful investigations. Owing to the great, improvements made ,in mining machinery, no doubt there are quite a number of o'd claims which could be successfully worked today, but on the other hand the present generation should not disparage t-he work carried out by the old miner who, considering the a PP !I ‘ ances he. had available, did. wonderful work in the early days. It can be seen from this brief review of mining that th e success of a gold mine depends upon quite a number of factors, all of which should receive careful consideration by an intending investor in mining securities.