HOW MINING COMPANIES ARE GOT UP.

Mount Ida Chronicle, Volume I, Issue 41, 12 November 1869, Page 3

HOW MINING COMPANIES ARE GOT UP.

The'lNelson Colonist' has the following m a letter from- a correspond dent; While speaking of companies, a few remarks for the information, of your readers \vill not be out of place, especially wapn • .it- is considered, that t iere has lately been a perfect rage For toe formation of so-called • companies. I say advisedly " so-called," for s6me, and I may say not a few, of them are nothing but a swindle. This is the kind 01 claim of which the .uninitiated must be extremely wary before they invest in mining shares, particularly in scrip. I will ; uive an example of the mo aus operandi: JSix men go and peg off a piece of ground in a likely neighborhood, an'u rorm it into a company under some gra.-nd name. A meeting of share=h due rs takes place, and the capital of tm company is fixed at £IO,OOO in shares at £2 each, out of which x-o-.J'a) arc considered as paid up capital, and tne remaining £4OOO are offered to public as scrip in 2000 shares, at price of say Is. per share o:. I/2 eaea. Now, m reality, the original six shareholders, who have only paid 51 earn for then* miiierVright, andnothing more, represent the paid up capital. /. ney ijo to work on tne claim, or pay uiren laborers out of the scrip they., h we sold, hut the money not being-suf-ficient to pay preliminary labor, a call of another s ailing of scrip is made to continue the work, and this still leaves the unfortunate holders of scrip liable to • nrty-oi rht more s-nilling calls, unless payable quartz is struck, and the claim pays its own expenses and perhaps even i dividend. Let us suppose now that the company has hit a good ..spot, and strikes a splendid vein of leaders; up 'XO the shares to their full value or double it, according to returns ofcrush:nr; and by this time the holders of scrip have paid perhaps four calls of one shilling each, but'they sell their scrip at £2 and upwards, and thereby •valise a handsome profit. On the confcrary if the chum should turn out a

duder, the poor scrip-holder may have -.sacrificed five or six shillings per share of scrip, and with shrugging shoulders say to himself bettor luck next time. Now what is the position of the original six shareholders, who >ave paid no calls, but have only watched proceedings ? It is simply this: If the L-itns--t u?ii -they gain £IO9O e ?ch to commence with, receive" tlieirxiividends at the same rate as the- holy ders of scrip, and may be able to sell their original share at double the amount."