GIFT OF Dean Frank H. Probert / THE COST OF MINING Published by the McGraw-Hill Book. Company Ne-w \Succe.s,sons to the Book Departments of the McGraw Publishing Company Hill Publishing Company Publishers of Books for Electrical World The Engineering" and Mining Journal The Engineering Record Power and The Engineer Electric Railway Journal American Machinist THE COST OF MINING AN EXHIBIT OF THE RESULTS OF IMPORTANT MINES THROUGHOUT THE WORLD BY JAMES RALPH FINLAY SECRETARY MINING AND METALLURGICAL SOCIETY OF AMERICA ; MEMBER AMERICAN INSTITUTE OF MINING ENGINEERS ; LECTURER AT HARVARD UNIVERSITY ON THE ECONOMICS OF MINING SECOND EDITION, CORRECTED McGRAW-HILL BOOK COMPANY 239 WEST 39TH STREET, NEW YORK 6 BOUVERIE STREET, LONDON, E.G. 1910 Copyright, 1909, 1910 by the McGRAW-HiLL BOOK COMPANY T GIFT OF DEAN FRANK H PROBERT PEW. DEW. The Plimpton Press Norwood Mass. U.S.A. PREFACE THIS book is the result of experience in the mining business covering some twenty years, in the earlier of which I had to do in rapid succession with such diverse operating conditions as those presented by Lake Superior iron mines, gold mining in Ecuador and Colorado, and lead mining in Idaho and Missouri. The profound differences in methods imposed by natural condi- tions could not fail to impress themselves on one's attention. Some six years ago a discussion started by Messrs T. A. Rick- ard and W. R. Ingalls of the Engineering and Mining Journal on the "Cost of Mining" attracted considerable discussion from min- ing engineers throughout the world, and I contributed some articles. It was natural to continue the investigation of the subject. In 1908, at the suggestion of Mr. Ingalls, I undertook to prepare some more extended articles for the same journal with a view of rationalizing the subject to show how the natural factors inevitably impose certain costs that sound engineering must recognize, and that to attempt economies unjustified by the conditions is the rankest extravagance. This book is the outgrowth of those articles and to a lesser extent of some lectures given at Harvard University and a large amount of discussion and correspondence. The subject is one that is inherently interesting to mining men and mining engineers and it seems possible that it may interest a somewhat wider field. Those who are interested in financial and economic developments can hardly escape some contact with the mining business. A full treatment of the subject would be encyclopedic, but no attempt is made here to give the work that character. I have merely tried to give a certain perspective of the business in coal, iron, lead, zinc, copper, gold, and silver, concentrating my effort largely on an attempt to exhibit facts in their proper proportion. The principal source of facts is the official reports of mining companies which are not in some fields so numerous as could be wished, and, in fact, from some districts are not to vi PREFACE be had at all. The best and most numerous reports are issued by copper, lead, and gold mining companies. In the coal business, reports of a certain kind are abundant and generalized statistics are exceedingly abundant, but little is to be had in the way of detailed information necessary to a satisfactory cost analysis. Consequently, the chapters on coal mining are more general than those on other subjects; but while a detailed treatment of this immense business would require a volume in itself, it may be remarked that coal mining is the simplest form of the industry and a sketch of its essential features does not need to be a long one. A single corporation accounts for 55 per cent, of the iron out- put of the United States, and at the same time its reports are far more luminous than those of any other concern in this busi- ness. Accordingly much attention is given to the results and statistical history of the United States Steel Corporation. The independent companies are either utterly secretive or give only financial statements that do not yield much to analysis. The discussion of lead mining covers the results obtained by companies typical of the conditions under which 80 per cent, of the American product is secured. In zinc mining information is not very satisfactory, but it is possible to give some idea of the operating conditions under which some 80 per cent, of the American product is obtained. In copper mining a great deal of detailed information is to be had showing results in a fairly satisfactory way in districts that produce nearly 90 per cent, of the North American copper. A few examples are taken from the outside world. In gold and silver, the United States is not pre-eminent and examples are taken rather freely from all parts of the world. It will be seen that the work deals largely with results ; matters of an engineering or technical nature are generally left out even to the extent of ignoring such matters as the assay values of ores. This is done in order to make the conclusions base themselves on strictly practical and conservative grounds. It happens by way of coincidence that this volume will serve as a kind of sup- plement to Mr. H. C. Hoover's work on the " Principles of Mining," which deals with the processes of valuation, organization, and administration, and the methods used in mining the more pre- PREFACE vii cious metals. The reader will find in Mr. Hoover's book an out- line of some of the technical problems not dealt with here. I must acknowledge the assistance given by various friends in the preparation of this work. Professor H. L. Smyth of Har- vard University in particular has aided with many important suggestions and is responsible for portions of Chapters I and II. Mr. W. R. Ingalls, editor of the Engineering and Mining Journal, has kindly allowed me to republish from the " Mineral Industry " of 1908 his important study of the cost of " Silver- Lead Smelting/' which forms the whole of Chapter XVI. Mr. Raphael Welles Pumpelly has given great assistance in looking over many reports. Messrs. F. W. Bradley, T. A. Richard, J. Parke Channing, Dr. Douglas, Courtlandt E. Palmer, H. M. Chance, George S. Rice, and many 'others have all contributed from time to time valuable suggestions and criticisms. I cannot help feeling that, while all of the material in this book is either old or public property to the extent of being known to at least a portion of the profession, there is nevertheless some- thing new in it in that it presents a view of the economics of mining on a grand scale and in broad outline. It does not seem possible that a mining man can fail to understand my meaning. If the facts are right the book is right. But in the great range of facts that I have tried to look into many things are more or less obscure and it is difficult to be sure that my information is author- itative. I shall be greatly obliged if the readers of this book will point out errors or supply information. If there is any demand for it I shall be glad to prepare a revised edition later, filling in some of the shortcomings of the present one. J. R. FlNLAY. NEW YORK, September, 1909. CONTENTS CHAPTER PAGE I VALUE OF MINING PROPERTY 1 II FACTORS GOVERNING VARIATIONS 19 III PARTIAL AND COMPLETE COSTS 39 IV STATISTICS OF COAL PRODUCTION 52 V COST OF MINING COAL 64 VI COST OF MINING LAKE SUPERIOR IRON 85 VII OCCURRENCE AND PRODUCTION OF COPPER 122 VIII LAKE SUPERIOR AMYGDALOID COPPER MINES 129 IX CONGLOMERATE COPPER MINES OF LAKE SUPERIOR . . . 159 X COPPER MINES ON FISSURE VEINS IN MONTANA, AUSTRALIA, AND ARIZONA 166 XI VARIOUS COPPER MINES OF ARIZONA AND MEXICO . . . 177 XII COPPER MINES IN VARIOUS OTHER DISTRICTS . . . . . 205 XIII THE COPPER MINING BUSINESS IN GENERAL 236 XIV LEAD 250 XV SILVER-LEAD MINING 267 XVI THE COST OF SILVER-LEAD SMELTING 295 XVII ZINC MINING 308 XVIII OCCURRENCE AND PRODUCTION OF GOLD 324 XIX QUARTZ-PYRITE GOLD MINES 338 XX CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD .... 374 XXI SILVER MINING AT COBALT AND GUANAJUATO 393 ix THE COST OF MINING CHAPTER I VALUE OF MINING PROPERTY Popular tendency to take fragmentary view of mining industry Its real extent and growth Basis of valuation of mines Average prices Average costs The concurrent fluctuation of prices and costs Gen- eral principles of relation of cost to price Types of mining enterprises The nature of a mining investment Algebraic discussion of the calculation of present values of mining stocks from determined factors The most profitable length of period for working out mines with known ore reserves. IN this volume I propose to discuss the business of mining on broad lines. Most people who connect themselves with this most important industry are interested only in certain sections of it, even to a point of almost forgetting that there is a mining business outside of their own particular field. People who have been engaged, for instance, in gold mining are apt to think of coal and iron mining as a different business. We find people talking about mining stocks in an unjustifiably restricted sense. A certain group will think of mining stocks as referring to shares in highly speculative precious metal enterprises, and will not even consider as coming within their range such really stable and valuable securities as those of the Homestake, Treadwell, or of the many great gold-mining enterprises controlled by Brit- ish capital. The public does not know that the class of specu- lative gold and silver \mines which depend on the discovery of an occasional bonanza, which is very likely to be exploited much more vociferously in the newspapers and on certain stock exchanges than its value warrants, forms only an insignificant fraction of the mining business. Such properties really depend more on psychology than on values. It is instinctive with a certain fraction of the human race to be enormously attracted by the glitter of gold. 1 THE COST OF MINING Another section of the mining public is that which devotes itself to speculation in copper shares, ignoring on the one hand, as too speculative, ventures in gold, silver, or lead, and on the other hand, as too slow, ventures in coal, iron, or building ma- terial. We have a very much larger group of people interested in coal and iron, who look upon their business as being more allied to manufacturing and devoid of the speculative element that is supposed to enter so largely into the mining business. EXTENT AND GROWTH OF MINING BUSINESS As a matter of fact the real mining business of the United States or of the world at large is too vast to be readily compre- hended by any single person. The technical part of copper mining or of oil production is in itself a sufficient study for any man who wishes to devote himself to it; but from the standpoint of the investing public not directly concerned with the manage- ment of properties there is no necessity for dwelling in much detail on the separate sections of the mining business. Ulti- mately there is no essential distinction between mining brick clay and mining diamonds. They are equally natural products; they must be looked for and handled on pretty much the same principles. It is probably a fact that brick clay is just as profitable and just as valuable as the rock which contains the almost infinitesimal proportion of diamonds which give it value. It may be a matter of surprise to many business men to learn that in 1907 the total mineral production of the United States in a crude form at the mines or metallurgical works was $2,069,- 000,000; that the total number of men employed in this business must be approximately 2,500,000; that of this total output the value of silver is less than 2 per cent.; of gold less than 4i per cent.; copper less than 9 per cent.; while pig iron accounts for 25 per cent.; coal, 30 per cent.; natural gas and petroleum equal the value of copper; and structural materials such as clay, cement, lime, and stone amount to 15 per cent. The contemplation of these figures will be a great help to one's sense of proportion in the mining business. I accordingly present the following tables of mineral production from the reports of the U. S. Geological Survey: VALUE OF MINING PROPERTY 1? 598 19 07 Quantity Value Quantity Value Metallic Pig iron (spot value) long tons 11,773,934 54 438 000 $116,557,000 32 118 400 25,781,361 56 514 700 $529,958,000 37 299 700 Gold, coining value troy ounces Copper, value at New York City pounds Lead, value at New York City short tons Zinc, value at New York City short tons Quicksilver, value at San Francisco flasks Aluminum, value at Pittsburg pounds Antimony, value at San Fran- cisco short tons 3,118,398 526,512,987 222,000 115,399 31,092 5,200,000 3,238 64,463,000 61,865,276 16,650,000 10,385,910 1,188,627 1,716,000 532,101 4,374,827 868,996,491 365,166 223,745 21,567 17,211,039 2,022 90,435,700 173,79,),300 38,707,596 26,401,910 828,931 4,926,948 622 046 Nickel, value at Philadelphia pounds Tin pounds 11,145 3,956 33285 Platinum, value (crude) at New York City troy ounces 225 1 913 357 10 589 Total value of metallic products Non-metallic (Spot Values) Fuels : Bituminous coal short tons Pennsylvania anthracite long tons 166,593,623 47 663 076 305,482,183 132,608,713 75 414 537 394,759,112 76 432 421 903,024,005 451,214,842 163 584 056 Natural gas 15,296,813 52 866 835 Petroleum barrels 55,364,233 44,193,350 166,095,335 120,106,749 Total fuels 267 513 422 787 772 482 123 592 445 305 847 526 Abrasive materials Chemical materials 1,098,784 12 387 719 1,646,919 30 759 684 Pigments __ 2,962 055 9 761 595 Miscellaneous 10,236,246 30,376,985 Total value of non-metallic mineral products . Total value of metallic products Estimated value of mineral products unspeci- fied 417,790,671 305,482,183 1 000 000 1,166,165,191 903,024,005 100 000 Grand total 724 272 854 2 069 289 196 TOTAL VALUE OF MINERAL PRODUCTS SINCE 1880 1880 1881 1882 1883 Metallic products $185 649 163 $187 549 908 $214061 009 $196 547 259 Non -metallic products 173,279,135 206 783 144 231 340 150 243,812,214 Unspecified 6,000,000 6.500,000 6,500,000 6,500,000 Total $364,928,298 $400 833 052 $451,901,159 $446,859,473 1884 1885 1886 1887 Metallic products $179 230 899 $172 491 087 $203,249,225 $236,598,254 Non-metallic products 221 879 506 241 312093 230 088 769 270,989,420 Unspecified 5,000,000 5,000,000 800,000 800,000 Total $406 110 405 $418 803 180 $434 137 994 $508,387,674 THE COST OF MINING 1888 1889 1890 1891 $237,574,422 $247,768,701 $292,649,877 $282 617 183 Non-metallic products 286,150,114 282,623,812 312,826,503 321,767,846 900,000 1,000,000 1,000,000 1 000 000 Total $524,624,536 $531,392,513 $606,476,380 $605,385,029 1892 1893 1894 1895 $281 514 539 $219 436 649 $185 804 594 $245 874 431 340,028,842 323,257,318 362 570 173 393 897 097 Unspecified 1,000,000 1,000,000 1,000,000 1,000,000 Total $622,543,381 $543,693,967 $549,374,767 $640,771,528 1896 1897 1898 1899 $251 445 519 $265 209 975 $305 482 183 $487 831 631 Non-metallic products 388,098,702 1,000,000 380,782,607 1,000,000 417,790,671 1 000 000 526,524,074 1 000 000 Total $640 544,221 $646 992 582 $724 272 854 $1 014 355 705 1900 1901 1902 1903 Metallic products . $511 632891 $480 006 859 $599 916 009 $583 433 948 Non-metallic products 594,398,501 660,993,170 722,186,708 907 495 032 1,000,000 1,000,000 1 000 000 1 000 000 Total $1,107,031,392 $1,142,000,029 $1 323 102 717 $1 491 928980 1904 1905 1906 1907 $502 149 624 $702 453 101 $886 110 856 $903 024 005 Non-metallic products 860522)721 400 000 922,282,724 400 000 1,017,696,178 200 000 1,166,165,191 100 000 Total $1 363 072 345 $1 625 135 835 $1 904 007 034 $2 069 289 196 I have not been able to cover the whole field of the mining business, but I shall endeavor to present some idea of the busi- ness as applied to coal, iron, gold, copper, silver, lead, and zinc. These materials amount to over 70 per cent, of the total mineral output and it is fair to believe that the principles governing the exploitation of this much will apply also to the remainder. The above tables should not be dismissed without some further comment. They emphasize not only the importance of the mining business, but also its increasing importance. The mineral output per capita in the United States in 1880, which was a boom year, was less than $7.50, while in 1907 it had risen to $25. There is not the slightest indication that the increase VALUE OF MINING PROPERTY 5 in the use of minerals has anywhere nearly reached its limits. On the contrary, the development is in full career and is likely to continue for many decades. So long as the United States has two thousand billion tons of accessible coal within its bor- ders and vast tracts of irrigable and swamp lands still undevel- oped and a rapidly increasing population daily becoming more accustomed to increasing standards of efficiency and an increas- ing scale of comfort, we may look forward to great increases of business. There is no other field in which activity promises to be more widely extended than in mining which furnishes the basis for most of the characteristic manufactures of modern civ- ilization. VALUATION OP ESTABLISHED MINING CONCERNS It is in this particular field also 'that the process of consoli- dation of unit enterprises into larger, more stable, and more effective groups is most noticeable. It is inevitable that this process will mean an extension of ownership among a larger number of holders, concurrent with the concentration of man- agement in proportionately fewer but more effective hands. The great enterprises of the present are usually far beyond the resources of any individual capitalist. Shares of most of our great corporations are divided among many thousand people. The expansion of this kind of ownership is as inevitable as the expansion of business itself. I regard it, therefore, as an im- portant function of the mining engineer and mining investor of the immediate future to study and fix the valuation of industrial shares, based partly or wholly on mining enterprises, as well as of single mining properties. My purpose is to explain how the valuation of mining properties depends on some cardinal prin- ciples^ that are easily understood in general terms, but may easily be obscured in concrete cases. These principles of course apply not to speculation but to serious investment. The basic factors are: first, average market prices; secondly, average costs; thirdly, the life of the mine. While each of these factors is so easily understood as to be practically axiomatic their application always involves questions that are not always easy to answer. Average Prices. The average price of any article for a period of years in the past is usually very easy to determine, but we are immediately confronted with the fact that prices determined 6 THE COST OF MINING with accuracy for certain periods of years do not agree with equally well determined prices of other periods of years. For example, the price of copper for the last fifty years has averaged some- thing under 16 cents per pound. For the last twenty years it has averaged 13.85 cents per pound, while for the last ten years it has averaged 15.82 cents per pound. Now since the question is not what prices have been in the past, but what they are likely to be in the future, it is evident that we must select from these various averages the one that seems most likely to conform with the probable conditions ahead of us. Such a selection involves the consideration of a great variety of subjects. A thing that throws most light on this problem is the course of prices them- selves. If these prices are plotted in a curve for a long period of years it will be found that there have been a series of high-price periods followed by another series of low-price periods. It may and will make a good deal of difference with our prediction of the future whether the crest of each high wave is higher than that of the one preceding it, and the low wave not quite so low as the one that preceded it. If we find such a state of affairs, we are probably justified in concluding that the average price of such a commodity is rising. One will be influenced in like manner by the demand, for a given article in comparison with other articles. If we should find, for instance, that the amount of lead used in 1890 was equal to the amount of copper used, while in 1900 only one-half as much was used, and in 1910 only one-quarter as much, it would seem to be well worth while to look into the reasons for such changes. These reasons might be complex and obscure. It might be that they would argue either for higher or for lower prices for either of the articles in question. If the consumption of lead were proportionately diminished, it might be explained by a deficient supply which would argue for higher prices, or it might be due to a substitution of other materials for the uses to which lead had been put; which would argue for lower prices. It is well to point out that these are precisely questions that people engaged in trade are constantly considering. But for the man who is look- ing for general tendencies and not for the conditions of the moment the ideas of such people are too much fixed on near considera- tions. Their eyes are apt to focus not on the developments of a decade, but on those of a week or month. It is against the VALUE OF MINING PROPERTY 7 judging of great and stable securities on these momentary con- siderations that it is most necessary to protest. Average Costs. The determination of average costs is the 1876 1878 1888 1890 1892 1894 FIG. 1 1900 1902 1901 1906 1008 8 THE COST OF MINING principal matter discussed in this volume. It is necessary to introduce here a consideration that is easily overlooked, namely, that if prices vary, costs vary also, but not to the same extent. The value of securities is too often affected by a hasty conclu- sion on the part of the public that a rise in prices will go wholly to profits, or that a drop in prices will be taken wholly out of profits. As an illustration of this fallacy I reproduce here an article published in the beginning of 1908 in the Engineering and Mining Journal on the Vanishing Point of Profits : CONCURRENT FLUCTUATION OF COSTS AND PRICES "The Federal Mining and Smelting Company's report for 1907 shows a net profit of $2,232,249 after taking out a " development account" of $300,000. This came from 130,373 tons of concen- trates containing 3,689,298 oz. of silver (worth 68 cents per ounce, or $2,508,722.64) and 59,746 tons of lead (worth $116 per ton, or $6,930,536), the total gross value being $9,439,258.64). On this output the profits amount to 23.6 per cent, and the costs must therefore be 76.4 per cent., giving an apparent cost for lead of 4.43 cents per pound and for silver of 51.95 per ounce. "At first thought one is apt to assume that with costs the same the company would receive no profit unless the prices were above 4.43 cents for lead and 51.95 cents for silver. How false such an assumption would be appears from the follow- ing: " The Coeur d' Alene mining companies, of which this is one, do not smelt their own concentrates but sell them to smelting com- panies under contracts somewhat as follows: The smelter pays for 90 per cent, of the lead at 90 per cent, of the New York price, or 81 per cent, of the full quantity and price when lead sells at 4.10 cents per pound or under. When the price rises above 4. 10 cents per pound the smelter pays 81 per cent, and one-half the additional price. Thus if lead sells at $4.50 per pound the smel- ter pays 81 per cent, of 4.10 plus one-half of 0.40 = 3.251. The smelter pays for 95 per cent, of the full value of the silver. A freight and treatment charge of $16 a ton is deducted from the value of average concentrates. Applying this rule to the out- put for 1907 we find that the cost of producing concentrates was $23.39 a ton, thus: VALUE OF MINING PROPERTY Selling Price Contract Price Lead 5.80 4.171 Silver 68.00 64.60 916.54 Ib. lead at 4.171 cents $38.23 28.298 oz. silver at 64.60 cents . 18.28 Total value per ton 56.51 Freight and treatment charge 16.00 $40.51 130,373 tons at $40.51 $5,281,410.23 Profits 2,232,249.00 Total cost of production 3,049,161.23 $3,049,161.23 $23.39 cost per ton produced 130,373 " Now let us see what would happen to the Federal Mining and Smelting Company were the prices reduced to the point where profits apparently vanish according to 1907 experience. The concentrates contained: lead, 45.827 per cent., 916.54 Ib., and silver, 28.298 oz. per ton. The value is figured as follows: Selling Price Contract Price Lead 4.41 3.426 Silver 51.95 49.353 916.54 Ib. lead at 3.426 cents $31.40 28.298 oz. silver at 49.353 cents . 13.97 k Total value $45.37 On this our costs are : Freight and treatment charge $16.00 Mining and milling 23.39 $39.39 " We have a profit remaining of $5.98 per ton. This on 130,373 tons would be $779,630.54 or 34.9 per cent, of the profit at 1907 prices. On this basis we may figure the real vanishing point for lead as follows: "Let the silver price remain stationary and we shall have in our concentrates silver worth $13.97. Our cost is $39.39; there- fore, 916.54 Ib. of lead must be worth $25.42 or 2.773 cents per pound. But as this is only 81 per cent, of the selling price the latter will figure 3.421 cents. It would seem, therefore, that we have reached the vanishing point of profits as far as the Federal 10 THE COST OF MINING Mining and Smelting Company is concerned with lead at 3.421 cents and silver at 51.95 cents at New York. " But this deduction may also be wrong, for the company has a chance to select its ores and produce a higher grade product. Suppose it produces from its more favorable mines only 65,000 tons of concentrates instead of 130,373 tons, and that the selected concentrates carry 56 per cent, lead and 38 oz. silver. Suppose this ore cost 10 per cent, more for mining and milling and 12.5 per cent, more for freight and treatment and we have a cost of Mining and milling $25.75 Freight and treatment 18.00 43.73 "But the ore will be worth as follows: Lead, 1120 pounds at 2.773 cents $31.06 Silver, 38 ounces at 49.353 cents 18.75 $49.81 "Thus we have a profit of $6.08 still or $395,200, and in addi- tion the company is keeping in its mines a very large amount of ore that may be available at better prices. With the above grade of concentrates, supposing that silver remains the same, the van- ishing point of profit on lead will be reached at 2.230 cents by contract or 2.753 cents at New York. " Even yet we have not reached the limit of the company's resources. It is safe to say that if lead had to be sold at 3 cents per pound, supplies to the mines would be cheaper and wages could be reduced." GENERAL PRINCIPLES OF RELATION OF COST TO PRICE A simpler explanation of the point explained here may be taken from the following considerations: A normal price for cop- per may be assumed to be 15 cents a pound. Let us suppose that a company under ordinary conditions can produce copper for 10 cents a pound, making, therefore, a normal profit of 5 cents. Let us suppose that copper goes up to 20 cents a pound and analyze roughly the conditions which would take place under such a rise of price and the effect of those conditions on the cost of production. VALUE OF MINING PROPERTY 11 Such a considerable rise of price could only be due to a defi- ciency in the supply. Apart from the cutting off of important sources of supply by war or other calamity, generally this defici- ency must be caused either by a shortage of ore or by a shortage of labor or by both. In the case of an individual mine a shortage in the supply of ore would naturally mean either impending exhaus- tiori or an insufficient amount of development. In an ordinary mine the volume of copper could be increased by utilizing some low- grade ores which would not ordinarily be worth working. Under the stimulation of a higher price the management would natu- rally utilize these low-grade ores which it could not work at 10 cents or even at 15 cents copper. It follows as a natural and almost inevitable result that each mine would, at 20 cents cop- per, undertake the working of a proportion of lower grade stuff at very much increased cost. But the mere undertaking of increased production implies an increased use of labor. Both the efficiency and the supply of labor are variables. The efficiency generally depends on the supply. Where an enterprise is well established and wages are high the num- ber of miners is apt to exceed by a certain percentage the demand. In other words, there is always a number of men looking for a job. The existence of a crowd of unemployed men always acts as a spur to the exertion of those who are fortunate enough to have jobs. The sudden expansion of the business will take away the surplus of labor. The men who come out of the shafts at night no longer see their employment threatened by competi- tion. They accordingly take things easier and the immediate result is a lowering of efficiency. This means an increase in cost. Sometimes it means a very great increase of cost. If the enterprise is not paying a rate of wages sufficient to cause an over-supply of labor under normal conditions, then any attempt to increase the scale of operations will be immediately thwarted by lack of men to do the work. If the company finds it necessary under such conditions to increase its operations it must first secure an increased supply of labor. The usual way out of such a difficulty is to raise the wages. Furthermore, if copper is scarce and in great demand it is usually a corollary that other products are scarce and in great demand. Very likely the railroads will be congested with freight; manufacturers of machinery overcrowded with orders. These 12 THE COST OF MINING are all factors that increase cost. A mining company wishing to get out a large output at 20 cent copper, when it usually gets only 15 cents, finds itself under a drain of heavy expense, bidding up prices of labor and supplies of all kinds in order to accomplish its purpose. In extreme cases it is quite probable that the cost is so much increased by these factors as to absorb the whole advantage of the increased price. That a certain proportion will be absorbed may be considered inevitable. The phenomenon of such increases of cost through such con- ditions of trade as have been described is familiar to any busi- ness man who has lived through one or two panics. When you see in the newspapers or in reports of industrial concerns com- plaints of a shortage of labor arid the inefficiency of labor you may prepare for a panic. It is a corollary from the same considerations that in periods of depression costs will be reduced. Let us suppose that our copper company which has been used to 15-cent copper finds itself unable to sell for more than 11 cents. This must mean that the demand for copper has diminished. It is no longer necessary to produce so much. There is no longer the necessity for active development. Copper that is needed can be produced from selected ores. Since fewer men will be needed the work will be done by selected men who will work under a greatly increased stimulus of competition. Wages may be reduced. The cumu- lative effects of such conditions may mean that the company which has produced copper normally at 10 cents may produce it for a period at 8 cents or even less and of course find a consider- able margin of profit. REDUCTION OF COSTS PER TON NOT A SIGN OF PROSPERITY Also we should not fail to note another general tendency in every important mining enterprise, and that is the tendency for costs to become reduced as time goes on. In part this tendency is due to general improvements in machinery and methods, new inventions, better transportation facilities, etc., which the indi- vidual enterprise shares with the industry at large. But the larger part comes from the settling down of the enterprise itself to a steady gait, to its better organization, to the better results secured from labor, and usually to a larger scale of operation whereby the unit cost of production is reduced by increasing the VALUE OF MINING PROPERTY 13 number of tons by which the fixed items on the cost sheet are divided. It is furthermore to be noted that a diminished cost per ton due to these causes hardly ever results in an increased profit per ton when the price of the product remains constant or even when it increases. Many reasons bring about this result, but the most important undoubtedly is the equally general tendency to a reduction with time in the metallic content of the ton of ore. This in many cases comes from an actual impoverishment with depth, which forces the adoption of better methods, resulting in lower costs through the inexorable necessity of diminishing returns. The Calumet & Hecla is a conspicuous example of the achievement in the last ten years of lower costs under the neces- sity imposed by a fall of one-third in the yield of its ore. But the enlarged scale of operation itself works in the same direc- tion even more effectively. The mill or reduction works is nearly always overbuilt for the ore developed. To get a low cost per ton it must be operated to its capacity. This puts a strain on the mine, with the result that in order to keep up the tonnage certain stopes are worked which yield rock from which only a small profit or none at all is realized. Furthermore, in many mines with ores of several grades the lowering of costs automat- ically, as it were, enlarges the available tonnage that may be handled with some profit, the effect being precisely the same as an increase in the price of the product. This result is shown very clearly by several of the newer Lake Superior Copper Mines, where an enlargement of the mill and of operations generally has resulted not only in a diminished cost per ton, but also in a diminished yield per ton. It is also conspicuously shown by most of the gold mines on the Rand. These considerations may be summed up in a few words. A diminished metal content in the ton of ore makes it necessary to reduce costs, and a reduced cost per ton, which always comes with time and enlarged operations, permits the handling at a profit of lower and lower grade ore. Therefore, quite independ- ently of the course of prices, we have a tendency for cost and metallic content per ton to fall together, and the net result of this tendency almost invariably is a diminished profit per ton. From these considerations it will appear that there is no great danger in calculating on average costs bearing a certain propor- tion to average prices. I feel like insisting that the only 14 THE COST OF MINING rational way of calculating mining profits is to consider both with the greatest possible care. In this connection I wish to point out that in calculating costs great attention must be given to capital charges as well as to operating charges. Undue attention to details of cost and too much attention to statements covering single months or years are apt to befog one's vision as to the real proportion of capital expenses. This is an error into which I have been particularly careful not to fall. In the discussion of costs to be presented in the following chapters I have given great attention to the problem of enter- ing in capital or construction costs in due and fair proportions. It seems worth while to state at the outset that in the metal mines of the United States .the total cost for the life of a mine is apt to exceed the operating charges from 20 per cent, to 40 per cent. NATURE OF MINING INVESTMENTS Mining companies may be divided into : I. Those which own a single mine confined to a single orebody or a definite tract. II. Those that own various mines each with its individual capabilities for expansion. III. Those that combine mining with other business such as transportation, smelting, or manufacturing. It should be plain that these variations afford a great range of considerations from simple to complex, and that there is room for the exercise of much talent and experience in the appraisal of the earning power of a property or of a company. In the case of a circumscribed property it is often possible to fix a valu- ation from purely physical considerations; but in the case of corporations doing a general mining business there are brought into prominence the technical and financial ability of the man- agement and the financial state of the corporation. By the last consideration we mean whether it is in debt or not and whether its indebtedness can easily be disposed of, or whether the debts will drown the earning power of the property rendering the equity of it only nominal value. Now in the case of mining property of all kinds there is one salient fact that should never be forgotten for a moment, namely, VALUE OF MINING PROPERTY 15 that it is a wasting asset which is always in process of distribution. This is true whether we are to consider only a single producing unit or a vast aggregate of such units. A mine has been likened to a bank account. The analogy with an account in a going bank is imperfect, because ^such an account may be swelled by new deposits, while new ore cannot be added to that which a mining property already possesses, although the actual amount may not be known until the prop- erty is exhausted. With an account in a bank being wound up by a receiver, however, the analogy is absolute. The receiver, as he realizes on the assets, pays the account back to its owner in instalments which are called dividends. Dividends from min- ing property are of precisely the same nature, namely, they are not interest on capital which remains unimpaired, but are the capital itself distributed in instalments. When the last asset is realized, the payment of instalments ceases and nothing is left. It would be a considerable public service if one could make clear to investors the difference between an ordinary investment and a mining investment. What is an ordinary investment? The term may describe real estate, railroad securities, mortgages, etc., in which the property is permanent and in which it is as- sumed that the principal will remain intact. The question that determines the value of such property is : What annual income does it yield? In the case of a mining property two concurrent questions must be answered in order to determine its value: What will be the sum total of dividends? and how long will it take to realize them? DETERMINATION OF PRESENT VALUE FROM KNOWN FACTORS If these questions can be answered it is easy to arrive at the value of the property as an investment. The general principle at the root of the matter is that the annual dividends must yield a good annual interest on the sum invested, and also permit a certain sum to be set aside each year, which securely invested at compound interest will repay the investment when dividends cease on the exhaustion of the mine. The present value of a mining property may be expressed algebraically as follows: Let A = number of tons in the deposit; let x = number of 16 THE COST OF MINING years necessary to mine this tonnage; and therefore A = yearly x tonnage mined; let p = profit per ton; let y = yearly sum set aside to sink the investment; let d = rate + 1 at which the sink- ing fund can safely be invested. Then, = yearly profit; - y, yearly dividend. Therefore the present value is the sum on which this dividend is a fair return, or if z is the rate expected, fpA \ 100 Present value = f - y J But if y is invested every year at compound interest the sum of these investments at the end of x years will return the capital invested now. Hence Present value = y (d + d 2 + d 3 + d x ) d(d* - 1) From these two values of the present value we find IQOjoA y ~ x(zS + 100) and we therefore have Present value - - ........ (1) xz \zS + 100 This formula will be easily understood if we use it to work out an example. The Miami Copper Company is said to have an orebody containing at least 14,000,000 tons of ore averaging 2.8 per cent, or 56 Ib. of copper to the ton. Of this, 80 per cent. or say 45 Ib. per ton can be recovered and marketed at an outside cost of 9 cents a pound. The company, which is capitalized at 600,000 shares, is said to have enough money in the treasury to bring it to the point of production at this rate. Let us assume that the deposit is worked at the rate of 700,000 tons a year, and therefore will be exhausted in 20 years if no more ore is found ; that the average price received for copper during this period will be VALUE OF MINING PROPERTY 17 15 cents a pound; that the interest on the investment should be 7 per cent, after providing for a sinking fund, and that the sink- ing fund can be securely invested at 4 per cent, compound inter- est. With these data what is the present value of the stock? Let us make the computation on a per share basis in order to simplify the numerical calculation. The annual product, 700,000 tons, is 1.166 tons per share. The profit per pound is 6 cents, which on a saving of 45 Ib. per ton would be $2.70 a ton, or $3.148 per share. S = LOiiL^Il = 30.97 ,U4 100X3.148 y = 100 + 7 X 30.97 = The yearly sum set aside out of dividends for the sinking fund is therefore about $1.00 a share. 100 Present value = (3.148 - 0.994) -^ = $30.78 a share. On the assumptions made this should be the value of the stock when the mine and plant are in full operation. If it takes two years to reach that condition the present value is subject to two years discount. It is to be understood, of course, that this example is merely illustrative, and the conclusion depends wholly on the truth of the assumptions. Two other principles may be stated. The first is that a mining property being an asset in process of liquidation, the more rapidly (other things being equal) that asset is distributed and the business wound up, the greater its present net value. This principle is subject to two reservations or limitations. One of these reservations is that it cannot generally be applied on a large scale in the case of any mineral product except gold without flooding the market and depressing the price, thus defeating its own object. The other limitation is the cost of the increased development and equipment necessary for the larger product. To develop and equip a property for a production of 2000 tons a day costs more than for 1000 tons a day, and this capital expen- diture must be deducted from the present net value. The capital expenditure may be roughly expressed as a multiple of the yearly product. For example, taking account of the capital expendi- ture our equation becomes 18 THE COST OF MINING Present net value = Present value - Capital expenditure. when C is a constant sum and n is the cost per ton of annua] product. Since both the capital expenditure and the present value increase with the shortening of the period of exhaustion there must be some period of exhaustion for which the difference between them or the present net value will be greater than for any other period, and this of course will be the most favorable period for which to develop and equip the mine. For purposes of illustration let us take the example already worked out - that of the Miami mine and assume that development and equipment costs $4 a ton of annual product and that C = $200,000. If we take several different values of x in succession, say 3, 6, 9, 12, and 15 years, we obtain the following net values: x 3 years; value per share ........................ $24.03 x 6 years; value per share ........................ 33.30 x 9 years; value per share ........................ 32.80 x 12 years; value per share ........................ 32.04 The most favorable period, therefore, would be somewhere between 6 and 9 years; the gain, however, over a longer period is small on account of the large sinking fund required, and might be more than balanced by the difficulty of getting the extra capital necessary, and especially by the danger that the shorter period of realization might coincide with a period of depressed prices. This of course would not apply to a gold mine except favorably. But where the product is sold on a variable market it is undoubtedly wiser to prolong the period of realization over a sufficient period to include the crests as well as the troughs of waves of prosperity, unless it can be made to cover the crests alone. CHAPTER II FACTORS GOVERNING VARIATIONS What the cost consists of Factors divided into external and internal groups External factors: labor, supplies, climate, transportation, water Internal factors : orebodies, attitude, concentrating qualitites, smelting qualities Mining and metallurgical losses and their effects upon costs Elements of a complete cost statement Character of actual reports Management How rich mines are more costly to operate than low-grade mines Hoover's theorem on the ratio of treat- ment capacity to ore reserves Economy and speed Private manage- ment and public interest. IT is necessary first to define what we mean by the cost of mining. It may be divided into three parts: (A) The use of capital in acquiring the opportunity to mine, i.e., ownership of ground, or leases. Since the value of this kind of property is only a speculative anticipation of profits to be won by operating, and is moreover often appraised in a fanciful or even dishonest way, I prefer to leave this ele- ment out of the discussion. I am quite aware, however, that as a matter of practical finance this cost must generally be considered. (B) The use of capital for equipping and developing a mine, for providing mills and smelters. (C) Current operating costs, including taxes, the mainte- nance of company organization, insurance, litigation, etc. For present purposes I select B and C and my definition is: The complete cost of developing, equipping, and working out a mine, allowing interest on the capital required for these pur- poses until it is returned in dividends. As any one with the most meager acquaintance with the sub- ject must know, the cost of mining at different places is subject to great variations. I am not sure that the factors governing these variations have ever been fully stated. A general division may be made between factors that are 19 20 THE COST OF MINING external or fortuitous and those introduced by the internal make up of the orebodies. It is evident that no quality in the deposit itself can influence any of the following groups of con- ditions : (1) The cost and quality of labor and supplies. (2) The climate, altitude, or distance from populous centers. (3) The hardness of surrounding rocks, the amount of water, the depth from surface. (4) The facilities and cost of transportation to milling or smelting centers or markets. All of the above conditions vary from place to place and introduce differences in the cost of mining, though not such great differences (as will be shown later) as are caused by the inherent qualities of the orebodies themselves. COST OF LABOR AND SUPPLIES The wages in the mines of the United States vary between 20 and 60 cents an hour. Usually the difference is partly made up by the varying efficiency of the men. Where wages are low the supply of labor is meager, the best men are constantly leav- ing for more favorable localities, those employed are not subject to the spur of a keen competition, and the results are constantly disappointing. On the other hand, where wages are high, the most ambitious and intelligent men are attracted and they com- pete with each other for the places. It is hard to fix any figure for the compensation thus effected, but it would perhaps be safe to say that one-half of the appar- ent difference is made up. Some authorities will say it is nearly all made up. Messrs. Taylor & Brunton tell me that in operat- ing sampling mills at Cripple Creek, Colo., where the wages are 40 cents an hour, and at Salt Lake City, where the wages are 25 cents an hour, there is but little difference in the labor cost per ton sampled. If we assume that while the difference in wages is represented by 20 and 60, and the difference in cost efficiency by 40 and 60 (or 70 and 100), we find that the variation in labor cost is only about 30 per cent, from the maximum. Since the labor accounts generally are about 60 per cent, of the total current cost of mining, differences in wages are not likely to account for a variation of more than 18 per cent. FACTORS GOVERNING VARIATIONS 21 In the world at large, outside of the United States, there may be instances where the differences in wages are more impor- tant than within the United States. Nevertheless, in the few important mining districts of which I have any knowledge, such as the Transvaal, India, and Mexico, where native labor is em- ployed very largely at very low rates, it is well known that the costs are not lower than in the United States for similar work. It appears that where labor is very low there is little or no acquaintance with machinery and the performance per man is correspondingly low. Where large numbers of natives, igno- rant of all civilized mechanical appliances, are employed at a large plant, they must be supervised by white men who do little actual work and get wages higher than those they receive at home. In the English-speaking countries where mining is an important industry, it may be said that the conditions as regards labor are almost identical with those of the United States. It does not appear probable, therefore, that my conclusions regarding the variations caused by wages in the United States need to be essen- tially changed when applied to the important producing centers of the world at large. Extreme variations must be confined largely to isolated and abnormal localities. The cost of supplies affects the cost directly. The important supplies are fuel, timber, explosives, steel, and tools. In the United States the price of these commodities does not vary enormously among the important mining centers, certainly not much more than 50 per cent, from the maximum. Since the col- lective cost of the various supplies is rarely more than 20 per cent, of the total current mining cost, a variation of 50 per cent, in the price will produce a difference of only 10 per cent, in that cost. The cost of supplies in the world at large is apparently sub- ject to about the same degree of difference as the cost of labor, but it is to be remarked that in any country, such as India and South Africa, where the price of labor is nominally low, the cost of supplies is usually distinctly higher than in the United States. In the Transvaal, for instance, Ross E. Browne esti- mates that the additional cost of supplies as compared with California accounts for approximately 10 per cent, of the total cost of mining. 22 THE COST OF MINING UNDERGROUND CONDITIONS The hardness of the rock is likewise a comparatively unimpor- tant factor. In any case the hardness affects only one division of the underground work; namely, breaking the ground. The stability of the ground is much more important than the hard- ness. Timbering is often an important item. Increase in depth adds something to the cost of hoisting and pumping, but it is to be remembered in this connection that if a mine is only 100 ft. deep, machinery must be provided for these purposes and a complement of men employed to operate it. As depth increases, the only change that comes in is the requirement of heavier machinery and additional power. The increase of cost, therefore, is far from being proportional to the depth. One consequence of extreme depth that might easily be overlooked is the daily cost of transporting the men to and from their working places. In the case of the Calumet & Hecla, the hoisting engines are in use two hours each shift in lowering the men and hoisting them out again. Not only does this represent a considerable expense in itself for mere hoisting, but far the greater part of the time of the workmen for this period is lost to the company. The temperature of underground workings often becomes a matter of considerable importance. A high temperature may be caused by the climate, or by great depth, or by the presence of hot waters or heat-producing chemicals. It is only in the last case that the heat can be called an inherent quality of the orebody itself. There have been cases of such high tempera- tures in mines as almost to prevent working altogether, but ordi- narily temperatures of 80 or 90 F. are about the limit reached in important mines. Such temperatures affect the energies of the men adversely, although men grow accustomed to them and suffer no ill consequences in the way of health. The impor- tance of this factor is extremely difficult to appraise in figures, although in the case of the Calumet & Hecla, Anaconda, and United Verde, to cite conspicuous examples, the loss of effective- ness in labor through this cause must represent annually a very large sum. These remarks are intended to apply only to underground mines. Where the work is done wholly upon the surface, the FACTORS GOVERNING VARIATIONS 23 facilities for working are so much superior that mines of this character must be considered separately. CLIMATE, ALTITUDE, AND POPULATION The influence of climate, though indirect, is powerful through its effect on human life and effort. Sometimes in places where there is an excessive rainfall or excessive heat or unhealthful conditions, the effect may be to limit the scope of operations. For instance, in Ecuador, South America, a plant has been run- ning 25 years, but on account of the climatic influences it has never been possible to secure more than about 60 effective miners, although the economical management of the property requires the employment of several times as many. Excessive altitude, and great distance from lines of trans- portation, place similar limitations upon enterprise. Where several factors of this kind are present at the same locality, the aggregate effect is to place almost unsurmountable difficulties in the way of successful operations, but as a general rule in places where important mines have been discovered, most of these difficulties have been overcome. For instance, in the San Juan region of Colorado, and in the Cerro de Pasco in Peru, adequate transportation facilities have been provided and the only adverse conditions still remaining are the altitude and disagreeable cli- mate which have in both instances a pronounced ill effect upon the performance of the labor. TRANSPORTATION AND MARKETING THE PRODUCT Transportation facilities may be described as adequate when they are sufficient to handle the output of a mine and to deliver with promptness the necessary supplies; but adequacy in this sense does not mean cheapness. Transportation is in very many cases one of the most vital elements in the cost of mining. This is particularly the case when the products have to be shipped considerable distances. In the case of coal and iron it is a matter of common knowledge that transportation is often the all- important factor, and even in the case of precious metals some- times the cost of transporation to mills and smelters equals, if it does not exceed, the cost of actual mining. The intimate bearing of this fact upon mining methods and results aside from 24 THE COST OF MINING the mere question of transportation cost in themselves will be described later on. Another factor that is often of considerable importance is the commercial matter of marketing the products. This is sometimes done by contract with selling agencies; and some- times by the company itself. In either case there is to be taken into condsideration, in addition to the cost of marketing, the success achieved in disposing of satisfactory quantities of the product. It is in this respect particularly that the cost of min- ing may be greatly influenced by this factor in determining the volume of operations. COINCIDENCE OF EXTERNAL FACTORS One would scarcely expect that all these various factors would move in unison, i.e., that they should all be equally bad in one place and equally good in another. So far as the natural conditions such as rock hardness, depth, and amount of water to be pumped are concerned, it is indeed extremely unusual that such factors are at a given place at either extreme; but it must not be forgotten that the remaining external factors have their effect through the efforts of man himself. If the mine is situated far from populous centers the reason is apt to be that the climate or the altitude is unfavorable. This generally means that labor is dear and inefficient, supplies costly, transportation difficult and expensive. These factors are likely, therefore, to be affected together, and if one is favorable they are all likely to be favorable and vice versa. The sum total of cost variations that may be due to the coin- cidence of these external factors is therefore considerable and is sufficient to prevent the working of abundant yet valuable products such as coal, iron ore, or salt at places where these con- ditions are all bad. It may be said that the above factors are those which as a rule govern the variations in the cost of low- priced and bulky mineral products. INTERNAL FACTORS The internal factors are: (1) The size and attitude of the ore- bodies ; (2) the relation the valuable material bears to the enclos- ing gangue or material; (3) the problems involved in metallurgical treatment. FACTORS GOVERNING VARIATIONS 25 These factors introduce immense differences of cost. For instance, in gold mining we find that the Alaska-Treadwell has mined, treated, and marketed its ore for $1.48 per ton, while the Camp Bird in Colorado producing gold ore subjected to the same process costs $12.50 per ton. The wages are the same, the rock is of the same hardness, the water is no problem in either case, the method of mining even is practically the same. The general management of the Treadwell is probably more econom- ical than that of the Camp Bird, but the difference is not to bo laid to this score. The difference comes in the factors mentioned above and those factors are so important that they are worth a more extended consideration. If we have a body of homogeneous material more than four feet thick and continuous, it is evident that the mine openings can be made very largely, if not wholly, in the stuff to be ex- tracted. Practically every blow struck produces ore. But reduce the thickness to be mined to one foot and we are at once confronted with the necessity of taking out three feet of worth- less material for one foot that is valuable, besides having to take pains to keep them separate. Here we introduce at once an enormous proportion of wasted expense that must be borne by the valuable ore. Now break the continuity of the deposit and it is evident that openings have to be made entirely through waste material merely to find and open up the scattered bodies. This evidently increases the cost still more. Now, since it costs about as much to handle one kind of rock as another, it is very evident that the cost of handling narrow and non-continuous orebodies may be many times greater than the cost of mining orebodies large enough to afford room to work in. A sort of dead line is established by a thickness of approximately four feet. Orebodies thicker than four feet are only moderately cheaper to handle than those of about that thickness. The attitude of an orebody has a great deal to do with the cost of extracting it. For instance, in the anthracite coal-fields, in Pennsylvania, and in various other coal-fields, the beds are thrown into a succession of folds with constantly varying slopes. The effect of this is double. First it renders more difficult the taking of the material from the working places to the haulage roads, and secondly it renders necessary a large amount of dead work in order to reach the various parts of the beds and also 26 THE COST OF MINING prevents regular systematic working. These two factors are sufficient to introduce a great increase of cost over that of mining a flat and unbroken seam. Faulting of the beds or veins and the occurrence of barren patches introduce complications similar to those caused by folding, but very much more variable in their nature. The fold- ing of the formation is invariably regional and is felt rather uniformly by all of the mines in a given district, while a series of faults may affect only one mine in a group and while that mine may have just as good ore and as much of it as its neighbors its costs will be higher. HOMOGENEITY OF ORE The homogeneity of the ore is a factor of great importance. This quality determines whether it is necessary to subject to metallurgical treatment the whole or only a part of an orebody. If only a part need be so treated we have a concentrating ore. The manner in which the valuable mineral lies in the enclosing rock determines how the concentrating must be done. In any case the process of concentration involves loss and expense, and the question of how far this loss and expense is justified depends on the cost and character of the subsequent metallurgical treat- ment. The cost of the metallurgical treatment depends primarily on the proportion of ore that must be treated. This proportion varies at different mines from 2 to 100 per cent. Obviously, where only 2 per cent, must be treated the cost of treatment as applied to the whole orebody will be less than where all is treated. The inherent metallurgical problem is therefore only reached when the question of selection is settled. Low COSTS IN MINING MAY MEAN GREATER EXPENSE ELSEWHERE The above seems a sufficient explanation of the fact that it is necessary to a discussion of mining to include a consideration of the processes by which the ore is to be treated. It is not possible to run a mine intelligently without achieving whatever economy there may be in dressing the ore so that the further handling will be facilitated. Efforts to make " records" of low costs per ton have in many cases actually resulted in good mines FACTORS GOVERNING VARIATIONS 27 being run at a loss. In this connection I can do no better than repeat some remarks from an article published in the Engineering and Mining Journal some years ago on " Mining Costs at Cripple Creek." " Let us take as a practical example a body of 10,000 tons of ore, running 1 oz. gold per ton. This ore can be shipped with- out sorting at a handsome profit, as follows: Gross value of ore $200,000 Cost of mining 10,000 tons at $3 per ton $ 30,000 Freight and treatment, $8.25 82,500 Total cost $112,500 Profit $87,500 "But suppose we reject half of this ore by sorting. By so doing we throw away 5,000 tons that will average $2.50 per ton, or $12.500. The cost of sorting, at 50 cents per ton, will be $2,500 more. Then our shipment will be as follows : 5,000 tons, at $37.50 per ton $187,500 Cost of mining and sorting, $6.50 per ton $ 32,500 Freight and treatment, $11.25 56,250 Total cost $ 88,750 Profit $ 98,750 "In other words, the gross receipts in this case have fallen $12,500. The cost of mining per ton is more than twice as great; the cost for freight and treatment per ton is $3 greater. The apparent showing by the superintendent is very bad; but never- theless he has made for the company $11,250 clear profit on the transaction. " In the first case our total cost for mining, freight, and treat- ment is only $11.25 per ton; in the second case it is $17.75 per ton, but there is more money in the higher cost. This is an example that has been worked out in practice." A false economy often results also from mining too much in a mere attempt to produce a greater output than the develop- ment of the mine really warrants. This invariably results in mining waste at a dead loss, but as this loss is on the same basis as the above, there seems no need to follow the discussion further. 28 THE COST OF MINING EFFECT OF LOSSES IN DETERMINING COSTS Mining, milling, and smelting losses often foot up to a total that is simply alarming. Now since it is almost self-evident that crude methods involving high losses may be cheap as re- gards operating costs, there is always likely to be a question whether there is any economy in low costs obtained at the expense of undue waste, or whether, on the other hand, high efficiency of methods may not be at the expense of excessive cost. I think it has seldom been considered that there are such substantial losses in each department of the business. If we hear a discus- sion of mill losses in a given district it is to be noticed that the question of mine losses is apt to be ignored; if attention is called to mine losses there is apt to be silence on the subject of smelting losses. It seems desirable, therefore, to draw attention to some of the salient facts in regard to losses. There never was a mine from which all the available ore was extracted. The ore is exposed to wastage from a variety of causes. If the orebody is large, soft, and homogeneous, as in the Lake Superior iron mines, ore is lost through absolute failure to mine it. Some is forgotten until the openings to it are caved and lost. Some ore is constantly being mixed with sand or rock and left be- cause its grade has been lowered. Some is surrounded by the cav- ing of the overburden into the mine openings in such a manner as to be irrecoverable. System, care, and expense will do much to diminish these losses. It may happen that beyond a certain point the cost of perfecting the extraction may increase very rapidly, may indeed necessitate a different and more costly method of mining. Since mines are worked for the profit and not for the gross value of their output it may be more economical to choose a cheap method in which the waste of ore may be great. For instance, suppose an ore worth $2 a ton can be mined with a 90 per cent, extraction for $1.25 a ton, but that by another method at a 75 per cent, extraction, it can be mined for 90 cents a ton. One hundred tons of ore in the ground would in the two cases yield the following results: ORE WORTH $2 PER TON Tons Cost Value Profit First case 90 $112.50 $180.00 $67.50 Second case 75 67.50 150.00 82.50 = $15 gain. FACTORS GOVERNING VARIATIONS 29 ORE WORTH $5 PER TON Tons Cost m Value Profit First case 90 $112.50 $450.00 $337.50 Second case 75 67.50 375.00 307.50 = $30 loss. It is evident, therefore, that even in the most homogeneous materials the cost of mining is directly affected by the value of the product. SMYTH'S FORMULA Prof. H. L. Smyth works out the mathematical expression for the proportion of the deposit that may be abandoned in order to secure a lower mining cost per ton as follows: Let Q equal the total number of tons of ore in a deposit recov- erable by the most perfect method; X, the number of tons aban- doned by any other method; p, the profit per ton by method Q; and p', the profit by the other method. When (Q X) p f equals Q p, the two methods are equally desirable. Therefore, P_ _Q-X P'~ Q and X fl-p\ p'-p Q \ P' J~ P' Then p' p equals the saving per ton effected by the second method. The proportion of the deposit that may be sacrificed therefore depends on the ratio of the saving to the profit per ton. This ratio increases as the profit diminishes; therefore for a given saving a larger proportion of ore of low value may be sacrificed than of high value. OTHER CAUSES OF Loss In flat deposits in hard rock it is nearly always necessary to leave some ore in pillars. Where the deposits are steeply inclined some ore is usually left in pillars unless the body is exceed- ingly small. In the case of very large bodies of low-grade ore, like the Alaska-Treadwell, large amounts are left in this man- ner, not only to insure the safety of the mine but also to insure cheapness of working. In every case where pillars are left there is a likelihood of portions being ultimately lost. Where ores are sorted, i.e., where they are not homogeneous, ' 30 THE COST OF MINING some good material is always rejected through ignorance or carelessness. Where filling is introduced into a stope there is invariably a certain amount of good ore that falls in with it and is lost. Where low-grade ores are sorted out and stowed under- ground because they cannot be shipped and treated except at a loss, there is a great loss of metallic value, but since it cannot be said that such material is payable it cannot under present conditions be called a loss. These mining losses are, I believe, seldom measured. More or less accurate guesses are made by the engineers on the ground, but the losses in mining are almost never seriously reported. In a general way we may place mining losses at from 5 to 30 per cent, of the developed ore. LOSSES IN MILLING AND SMELTING Milling losses are in some localities painfully and accurately studied; in other places they are casually guessed at or ignored. It is usually fashionable to guess the extraction at 80 to 90 per cent, for concentrating and at about 95 per cent, for cyaniding or chlorinating. Sometimes, as a matter of fact, losses in concen- tration amount to 40 per cent, or even more. When the milling is not systematically and accurately checked the losses as a rule are much higher than the owners imagine. Little definite infor- mation is to be had. Smelting losses are probably determined much more accu- rately than either mining or milling losses, but they are almost never mentioned in reports to stockholders. In this department of the business it is necessary to take more or less general state- ments of metallurgists. The importance and economic bearing of the losses sustained in some representative districts are shown in an accompanying table. Much care must be exercised in the interpretation of these figures for economic purposes. The values thrown away are theoretical values. The practical limit of extraction invari- ably falls short of 100 per cent. The real purpose of the table is to show in current practice the debatable ground in which the curtailment of losses is confronted by a rising scale of costs. FACTORS GOVERNING VARIATIONS 31 PROPORTIONATE RECOVERY AND LOSSES IN 100 TONS OF ORE IN SOME IMPORTANT MINING DISTRICTS J"" X c Lake S.E. S. W. 2U Cripple ? Superior Missouri Missouri %& Creek | Iron Lead Zinc tf Gold s ffi 3 Gross value in the ground Gross value recovered by mining .... $110 88 $800 $600 to 760 $460 400 $500 $375 to 475 $280 246 $1000 $850 to $950 Gross value recovered by milling Gross value recovered by smelting . . . 550 to 744 $300 to $340 270 to 332 187 to 300 163 to 260 186 180 782 to 912 840 to 940 Gross aggregate losses M?, $56 to $250 $128 to $190 $240 to $337 $100 $60 to $160 80 70 to 93 58 to 72 33 to 52 64 78 to 94 The aggregate losses represent the maximum of additional operating expense theoretically justi- fiable by the extinguishment of losses. It has been shown in the case of Cripple Creek ores how a mining cost may be too low, and it may be shown in the same way that milling and smelting costs may be too low. As a mat- ter of fact they are very apt to be too low; rather more often too low than too high. Nevertheless it is perhaps well to point out that the economical cost is always a function of the value of the product. Of the various products of mines gold is the only one whose value is fixed. Where the product is variable in price the proportion of the losses is constantly changing, and the amount of expense warranted by the pursuit of such losses also varies. Since the operation of a mine, mill, or smelter is usually a thing that does not lend itself to a ready adjustment, we find that refinements of methods designed to limit losses are fixed to those that will be economical at rather low prices. For instance, we find copper plants are planned to make savings that will be economical at 13-cent copper instead of at 25-cent copper; lead plants are planned for 4-cent lead and not for 6-cent lead, etc. WASTE IN EXPLOITATION At this point it may be pertinent to remark that questions of mere economy and profit may come into conflict with public policy. Much has been said about the necessity of conserving the forests* of the United States. A forest when denuded is not beyond the possibility of ultimate replacement; an orebody or a coal seam, on the other hand, once destroyed is gone forever. It 32 THE COST OF MINING is very likely out of the sphere of the Government to interfere in the disposition of properties that have passed to private ownership, but it is quite feasible for the Government to take measures to prevent undue waste in the exploitation of the lands that it still retains; and it seems fully worth while for large private proprietors to consider the future as well as the present and to take measures to prevent some of the shameful wastes that are going on. For instance, no one will deny that ultimately the world will need every ton of coal that can be had. Future generations will be very glad to mine coal from 2-ft. seams, many of which are now utterly destroyed by the working out of thicker seams not far below them. Similarly, it would seem worth while for land owners to bring pressure to bear in the working of metal deposits like those of southwestern Missouri where there is a waste of at least 50 per cent, of the zinc, and at Lake Superior where there is an enormous waste of low-grade iron ores which have been caved in and left behind during the extraction of richer portions. Wherever the introduction of these economies in material can be effected without financial loss, their introduction can do the operators no harm and will certainly be a benefit to the land owners and to the public at large. STATEMENT OF MINING COSTS A true statement of mining costs, therefore, should with due consideration of the above factors fall under the following head- ings: (1) General expense of the company 1 Exploration and development 2 Stoping cost 3 Stoping and sorting losses 4 [ Amortization of mining plant .... 5 Transportation to mill 6 Operating costs 7 Losses 8 Amortization of milling plant .... 9 Transportation to smelter 10 Operating costs 11 (2) Mining. (3) Milling. (4) Smelting, re- fining and ' ' I Amortization of smelting plant. . . 13 , , fining and T Losses 12 Unfortunately it is impossible to treat the subject so com- prehensively owing to the absence of adequate reports. Most FACTORS GOVERNING VARIATIONS 33 companies are ignorant of both their costs and their losses; some know their costs but do not know their losses; very few know both. Some of the most scientifically managed concerns, like the American Smelters Securities Company, issue very few reports, although the management of this company does publish one report, that of the Esperanza Limited, which tells the whole story, but even in that model statement there is no specific refer- ence to the amortization costs nor to mining and smelting losses. Where a company does not own a mill or smelter it cannot, of course, state details for any amortization charges or operating costs or losses for those departments. Nevertheless, these things cannot be ignored either scientifically or commercially. Charges for them are fixed by contract. When a mine sells its ore to a smelter it pays commercially for amortization and operation of the smelter under treatment charges and for the losses by arbi- trary deductions. In the absence of such reports as will give the essentials the most feasible plan of treating the subject seems to be to divide the costs into tl>ree main headings: (1) Mining, including devel- opment; (2) milling, including transportation from mine; (3) smelting, refining, and marketing, including transportation from mill and to markets. Generally the reports, or reliable information, are sufficient to give a fairly close approximation to the costs. It is seldom indeed that any statement can be found showing the charge to be made under each of these headings for amortization of plants, but there is usually some means of getting an idea of it. This can be done many times by simply ignoring credits to capital on construction accounts over a considerable period of years. This can be done on the logical principle that since the construc- tion is all for the benefit of the operation of the mine it should all be absorbed in operating accounts. It will hardly be advis- able to give in all cases the sources of information on which the cost estimates are based ; but it is possibly worth while to assert that the figures are not far from the truth in spite of certain differences from published statements. MANAGEMENT In discussing the factors that determine the cost of mining I have touched thus far only upon the tangible and definite ones 34 THE COST OF MINING of whose importance we can get a more or less logical measure; but the discussion would not be complete without some mention of the intangible and unmeasured but important factor of man- agement. I wish to apply the term in its broadest sense and include in it the financing of an enterprise, the determination of its scope, the selection of its methods, and its administration. To begin with, it is noticeable that enterprises in a given -dis- trict have much in common and are apt to differ in methods from the enterprises of other districts. For instance, in Cripple Creek it is rare for a mining company to treat its own ores, while in Butte most companies have done so; in the Lake Superior copper mines the underground work is done largely by contract with the miners, while in Arizona this is exceedingly rare, and so on. Each district has its own peculiar methods. There is a probability that the methods of a given district are pretty nearly correct because they are inevitably the result of experiment, or evolution, and the fit have survived. It is logical to expect this. When a man comes into a district that is new to him and says that the industrial methods in use there are wrong, he does nothing less than declare that the thousands of people who have developed those methods are either ignorant or stupid or lacking in enterprise. Once in a thousand times he may be right; in 999 cases he doesn't know what he is talking about. To illustrate how profoundly true this principle is even in the face of reasons to the contrary, I may be pardoned for relat- ing an experience of my own: While traveling on the slopes of the Andes in Ecuador ten years ago I noticed that my traveling companion, a Spanish-American, did not wash or bathe, but carried in his vest pocket a small bottle of camphor with which he occasionally rubbed his nose. Whenever we came to a stream I would very likely take a bath. To this Rodriguez objected vigorously, saying, "If you want to live in this country, without getting the fever you must observe two rules, namely, sleep in a closed room, and don't bathe out of doors." I told him, and thought, that the true laws of health demanded fresh air and cleanliness, and probably every Anglo-Saxon would have said the same thing. But, on returning to this country a few months later, I heard of the mosquito theory of malaria and saw a new light. Rodriguez was right. Observation had taught the na- tives empirically two ways of keeping off mosquitoes and fairly FACTORS GOVERNING VARIATIONS 35 effective ways. They could not give the reasons but they got results. It is quite true that a mosquito net is just as good as a coat of dirt to ward off the fever-bearing insect, and that by means of it one may also enjoy the luxury of fresh air; but the point is the mosquito must be kept out. The person who does not realize this is running a risk of death from sheer ignorance. The same thing may be said of superficial criticism of customs in gen- eral and of mining customs in particular. There is very apt to be a "joker" in the game for the rash innovator and he may find himself and his new methods up against a hand of five aces. I feel, therefore, that, as a general rule, it is unfair and stupid to measure the methods of one district by the standards of an- other, but this does not mean that the methods in use are always the best. Among operators in the same district, where all are equally conversant with the governing factors of the situation, we will invariably find some who get better results than others. We will find, running side by side, mines that show great and apparently inexplicable differences in cost. We will find in any district examples of mines that have failed under one manage- ment and succeeded under another. While the effect of man- agement is well understood by every one, it does not lend itself to expression in figures; nevertheless there are some things that may be said of it of a nature pertinent to this discussion. One thing has been noted as a rule; viz., rich mines cost more to run than low-grade mines. It is generally conceded that this is to be explained by the liberality of the carefree. There is something more than. this. Suppose two deposits are found 20 miles apart, one of ore worth $5 a ton, and the second worth $2 a ton. The first is opened up by the first method that occurs to the owners, the ore is shipped and it is discovered that it costs $3 a ton to mine it. The owners congratulate themselves on their 40 per cent, profits. Their business is established; they are making lots of money; to make changes and improvements is laborious, expensive, may involve delay in marketing the pro- duct and may not turn out well after all. Why not leave well enough alone? The second body of only $2 ore, after being opened up, is left alone for a while. It is considered too low-grade to pay. But some enterprising person at last comes along who thinks it may be worked. He chooses for a superintendent, not the first 36 THE COST OF MINING man he meets, last of all some friend or relative but some one he thinks able to get results. All possible methods are studied in order to choose the cheapest. All possible precautions are used to avoid unnecessary expenditures on plant. Every em- ployee is impressed with the necessity of efficiency. After the enterprise is finally going it proves that the ore is being mined at $1.20 per ton and the triumphant owner of the $2 ore also secures 40 per cent, profit on his product. LOGICAL REASON FOR RICH MINES COSTING MORE There may be no physical reason for this difference in cost; there may be no intentional liberality on the part of the owners of the richer property. Nevertheless, there is a logical ground for a difference in the selection imposed by necessity. In the rich mine there is no necessary selection; ergo there is no selec- tion. We may, therefore, count on a certain increment, some- times very large, sometimes very small, of additional expense in mining rich ores as compared with poorer ores. Necessity may work vast economies in the same mines. The Champion iron mine at Beacon, Mich., was producing ore in 1892 at $2.50 a ton. It had then been running 25 years and was reputed to be a very well managed mine. In 1899, the mine was deeper, the orebodies smaller, wages the same, the plant the same, the management the same, but the ore only cost $1.25 per ton. Necessity had worked this change through the panic of 1893. Similar changes were wrought in other mines. HOOVER'S THEOREM The economic ratio of treatment capacity of ore reserves is a question that has been brought up by H. C. Hoover and vig- orously discussed by many prominent engineers. Ross E. Browne (" Working Costs on the Witwatersrand ") has recently brought additional evidence to bear out the correctness of Mr. Hoover's conclusions that economically mines should be worked out with great rapidity and that additional plant should be pro- vided for the extraction of discovered ores within periods of from three to six years. There seems to be no doubt of the math- ematical correctness of this conclusion, but it seems to apply logically only to gold mines where there is no practical limit to the sale of the output. In the mining of products other than FACTORS GOVERNING VARIATIONS 37 gold it seems that a limitation is put upon the output by the market. In the case of Lake Superior iron ores, for example, there are fifteen hundred million tons in sight. To work these all out and convert them into pig iron in six years is not only a physical impossibility, but would be economically absurd. It is not at all absurd, however, for an isolated operator among many to apply this principle to his own profit. It may be that the application of this very principle has resulted in the forma- tion of gigantic trusts. It seems probable that the growth of the Carnegie Steel Company in competition with its neighbors may have been largely due to the application of this idea to steel manufacturing; but in course of being fully worked out, the result was the formation of the United States Steel Corporation which now controls 75 per cent, of the iron ores of Lake Superior and from mere extent of growth has landed in a position where the application of Mr. Hoover's principle is no longer possible. ECONOMY AND SPEED It is to be remarked in this connection that a wide-awake manager may see his way clear to overlook questions both of a high percentage of extraction and of cheap work to reap the ben- efits incident to speed. Take, for example, a body of soft iron ore of limited cross-section pitching rather steeply into the earth. The requirements of thorough extraction and cheap working would very likely be satisfied by the use of the slicing system of mining, but in such a case the volume of product would be lim- ited because the area on which slicing can be conducted is prac- tically limited to a single horizontal section of the orebody. This limitation of the product during years of high prices might be a very serious handicap and it would probably be wise to adopt a different system, perhaps less effective and more costly, but which would allow the working of a number of levels at once and the turning out of a large output at an advantageous time. The management of large properties may come into conflict with public economy in the following way: Large sums of money are locked up in the purchase of great tracts of mineral lands, far in excess of the requirements of the immediate future. The sums thus invested are usually raised by bond issues and the inter- est on these, together with taxes, amount annually to large^sums which the public must pay. These charges are inevitable, and 38 THE COST OF MINING are quite independent of any desire on the part of such holders to raise prices through the opportunities afforded by the exist- ence of partial monopolies. Conspicuous examples of this state of affairs are afforded by the United States Steel Corpora- tion, especially since it has absorbed the Tennessee Coal, Iron, and Railroad Company, and by the Philadelphia & Reading Coal and Iron 1 Company. Both of these great corporations have mineral lands sufficient to guarantee their product far into the future, but they represent investments on which charges of many million dollars a year must be paid, and paid by the public. CHAPTER III PARTIAL AND COMPLETE COSTS Terminology and method of analysis Partial and complete costs Operating, maintenance, depreciation, and amortization Dividend costs and selling costs Examples of depreciation Analysis of cost statements Amortization tables Table of plant cost per annual ton and life of mines Investors' precautions. I KNOW from experience that many operating men, though deep in details, are only acquainted with partial costs. Their point of view does not reach the tout ensemble. For instance, a man may be in charge of a mine and called manager or superin- tendent. His business ends when the ore is delivered into cars to be shipped to the mill. Up to that point he thinks he is famil- iar with the costs. Probably he is not, though he may be. It is more likely that he knows little or nothing about the capital invested in the mine and the average annual value of it. He is probably full of information about the current operating costs of his one department the mine. He does not know what is involved in transportation to the mill, in milling, in smelting, in general expense. His knowledge of the business as a whole is very limited. In talking with other mining men he may be elated or depressed at learning that his costs are lower or higher than theirs, but he may find out later that he has reasoned from false premises. He is really talking about a segment of the busi- ness to men who are also talking about segments of the business, and the segments may be, and are very likely to be, different in each case. Now such a man is very apt to graduate into a mining engi- neer and to examine mines and report on them without once giving consideration to the limitations he is under. He repairs by experience some of his misapprehensions, but his conception of the business is very likely to remain only a partial conception; 39 40 THE COST OF MINING at the best he is clear about only a part and hazy about the rest. The costs reported to stockholders and investors are very apt to be only partial costs. They are almost never so expressed as to give one a true understanding of the business. This may not be intentional; merely a narrow view of the financial real- ities. In the following chapters I shall review the statements of many mining companies and it will be seen that I have recon- structed nearly all of them, putting my own interpretation upon their figures and in many cases rejecting their figures as inade- quate and substituting others. I would not be rash enough to do such things without reason. It is in every case merely draw- ing an irresistible conclusion, such conclusions as no two men would argue about so long as they had the same point of view. I propose here to describe my method and point of view in cost analysis; but first I shall define certain expressions that are in common use in this discussion. There is a certain confusion in the use of the terms, operating, maintenance, depreciation, and amortization. In this book I intend to have a perfectly clear meaning for three of these terms. Maintenance is a term to which I attach little importance. It is simply the cost of keeping things in good order and is an unde- niable operating item. I shall assume under all circumstances that maintenance is included under the head of operating. Operating, or current operating, charges are those that relate to the obtaining of product. It includes all the labor, salaries, and supplies used on the actual yield of a mine for a limited period, but excludes all charges that may be a preparation for a yield to be obtained later. Note that I say "for a limited period"; for I make it a cardinal and self-evident axiom that whenever we extend our point of view to the whole life of a mine or property, we immediately abolish the difference between operating and capital costs. Then all expenses are operating expenses. The capital charges of depreciation and amortization are only suspense accounts intended to exhibit the difference between operating for a short period and operating for the whole period. Now unless we are holding a post-mortem examination on a dead mine we never know just what the difference is. These items then are estimates, and I feel it necessary, in order that one may PARTIAL AND COMPLETE COSTS 41 understand my cost analyses, to explain carefully how I make these estimates. Frequent reference will be found in coming chapters to divi- dend costs and to selling costs. By selling cost I mean the real or complete cost, the cost at which the product must be sold to justify the enterprise. It includes the whole cost, including all capital employed, with interest for the whole period of operating. Obviously, if these total expenditures amount to say $10,000,000 and the total return is only $9,500,000, the enterprise is not a suc- cessful one. But suppose that of the ten millions spent, the sum of three millions is represented by two millions spent on initial plant and one million for interest on that sum at 5 per cent, for 10 years during which there were no dividends. These three million dollars are not operating charges, at least they are not the current daily operating charges that the mine manager knows about. His operating charges are only $7,000,000, while the proceeds are $9,500,000. Here we have $2,500,000 to be paid in dividends. Here our selling cost is $10,000,000. Our enterprise is really and truly a failure unless our returns equal that amount. But our dividend cost is only $7,000,000. This sort of a difference is practically universal in mining cost state- ments. I never knew of one in which the real selling cost was calculated. As a general rule the cost of production is understated much more than it would be in this case if it were given at 7 instead of 10. Why is this? Because 7, the dividend cost, is in itself a composite figure. It consists of two elements: (a) those costs that plainly belong to merely getting out the product, and (b) some other costs that seem to be creating something perma- nent, but really are not. These things are apt to be euphemized into " capital charges." In our hypothetical case our 7, being the dividend cost, is very apt to be made up of the figures 5 and 2; the first being " working charges" and the second being "construction." This construction seems to be permanent; it is " doing great things for the property," " working wonders." In fact it is absolutely essential; but it must be paid for before dividends appear, and therefore is included in the dividend cost: but our euphemistic report gives the working cost, the cost of production, at 5. Remembering that we found at the very beginning that the 42 THE COST OF MINING real cost was 10, we must explain that the difference is made up of amortization and depreciation. Amortization accounts for the difference between 10 and 7, depreciation accounts for the further difference between 7 and 5. The omission of these sums may not, possibly, be of any injury to any one; but it certainly results in an outrageous underestimate of costs. By depreciation, then, I mean current construction costs; improvements. Until a mine is dead and ready to be buried in a watery grave there are always expenses of this kind. Depre- ciation means literally the process of losing value: practically it means the exact opposite; it means expenses undertaken to counteract loss of value. I hear it asked, why is this not main- tenance? It is maintenance. It only seems not to be main- tenance because the items that compose these charges have the appearance of being new plant, not merely replacements of old plant. I shall give some examples. Let us suppose a mine to be started on a very large tract of land (to avoid all complications except natural ones, let us get rid of our neighbors), with a vein running north and south and dipping vertically. Two shafts are started, a mill erected and the property put in operation. At the depth of 500 ft. the south shaft runs out of the ore. The manager is alarmed, the direc- tors thunderstruck. But the north shaft is in good ore at 700 ft. Ah! we have an ore shoot pitching north! Every level goes farther in that direction than the one above it. A new shaft must be sunk, No. 3, further north. It must be sunk 1500 ft. at a cost of $150,000 before it produces anything. The south shaft barely lasts till No. 3 goes into commission. You may be sure that this situation is fully explained to the stockholders. No. 3 shaft is " capital expenditure," etc., etc. "It will not be necessary to undertake anything of the kind again ! " This statement is utterly misleading. The construction and equipment of No. 3 shaft is pure depreciation an expenditure that should be written off to operating as fast as it is made. No. 3 does nothing but take the place of the south shaft. Again, our original north shaft has reached the bottom of the ore. " We have again been disappointed. It was unfor- tunate that we equipped No. 3 as we did," I might quote from an imaginary, but very frequent, report, "because certain unfore- PARTIAL AND COMPLETE COSTS 43 seen conditions have arisen that make it evident that a different plant would have served our purpose better. It is found now that the ore shoot has a pitch averaging 45 to the north along the plane of the vein. Evidently a shaft inclined to the north- ward at that angle would follow the ore. A single shaft like that would accomplish our purpose as well as a number of ver- tical ones, or a series of long drifts from a single vertical one. Moreover, we find that at the 1500-ft. level of No. 3 shaft the vein, instead of standing vertical as it has above, is now dipping to the west at an angle of only 45. After mature considera- tion it has been decided that our best course will be to put a curve in No. 3 shaft and change it into an incline below the 1500-ft. level, following the oreshoot in a northwesterly direc- tion. This will necessitate changing our equipment. Our flat rope hoist, designed for handling cages in a vertical shaft, must be replaced by a round rope engine with a drum. We must install skips, for which our engineers assure us it will be best to cut underground loading pockets." It is useless to proceed further, except to explain that here is another great capital expenditure "that will never occur again." It is pure depreciation. It isn't even new. It is the same problem that caused the sinking of No. 3 shaft. The solution, however, appears new. I could cite " capital charges," "construction" or whatever it is called, in hundreds of cases like the above. The same thing appears in all kinds of disguises. There are always expendi- tures going on that appear to be for permanent improvements, really are for permanent improvements, but which are really nothing but expenses required to keep the property from depre- ciating; in other words, to enable it to be a good plant and not get antiquated, or no longer adequate to changed requirements. Money is even spent uselessly, often merely for fashion; for fashion is so far from being confined to women's finery that it reaches the methods and appliances in the gruesome depths of mines. I would not be misunderstood about these charges. Some- times construction that amounts to nothing but depreciation is combined with construction that does make a real addition to capacity and earning power and is truly capital. Obviously it is impossible for me to familiarize myself thoroughly with all 44 THE COST OF MINING such circumstances. I am not trying to go into niceties. My purpose only is to exhibit the mining industry in its broad and fundamental outlines, unobscured by detail. It is necessary, therefore, to explain that in the analyses of costs in the following chapters I have not followed any exact rule. My analysis is founded on the circumstances exhibited by the reports. These, however, fall into two general groups: rich mines that have built up their plants entirely out of profits or in which at least there has been a continuous growth so that the original capital is only an insignificant fraction of the total investment; and low- grade mines not rich enough to start themselves and not profit- able enough to make the original investment soon disappear. In the first case I make no attempt at calculating amortization, but adopt the much simpler method of writing off all expendi- tures, over as long a period as I can get figures for, to the cost of the production. In the second case I charge all expenditures of every kind to capital up to the time when the mine is producing. After it is producing I charge to capital those expenditures made to increase the capacity until the mine has reached what appears to be an average production. Then this total is written off, with interest, over a period that seems reasonable, by charging up each year a sum calculated to retire the investment within the required time. This charge is the amortization of capital. Ordinarily I put the period of initial capital expenditure as far back as possible and, unless the increase of capacity is very considerable, I charge off the yearly new construction to oper- ating and call it depreciation. It seems hardly necessary to go more into detail because in most cases those who are interested will see from the cost analyses themselves the method adopted. A word further about amortization. When the sum to be written off is determined it is necessary to fix two further ele- ments: the rate of interest to be charged and the period in which the principal must be extinguished. The first I have taken in all cases at 5 per cent. The second is the great field where judg- ment and experience come into play; wherein the mining busi- ness exhibits its peculiarities and where it is different from any other form of commercial enterprise. We must discuss it fully, but first let us show the methods by which amortization may be calculated. One way is shown by the following table in which PARTIAL AND COMPLETE COSTS 45 a sum of money is returned to the investor in equal instal- ments, which are supposed to be part interest and part prin- cipal. The part that represents the return of principal for each year is deducted from the original sum, and for the next year interest is calculated only on the diminished principal; but, since the yearly instalments are equal, as the yearly inter- est requirements diminish the part applying to the return of principal will increase so that the extinction of capital becomes progressively more and more rapid. AMORTIZATION TABLE. 5 PER CENT. Showing number of years in which $1,000 is cancelled at 5 per cent, annual interest and 5 per cent, amortization, or $100 annual instalment. Years Amortized Interest Balance Due 1 50.00 50.00 950.00 2 52.50 47.50 897.50 3 55.12 44.88 842.38 4 57.88 42.12 784.50 5 60.77 39.23 723.73 6 63.81 36.19 659.92 7 67.00 33.00 592.92 8 70.35 29.65 522.57 9 73.87 26.13 448.70 10 77.56 22.44 371.14 11 81.44 18.56 289.70 12 85.51 14.49 204.19 13 89.79 10.21 114.40 14 94.28 5.72 20.12 15 98.99 1.01 0.00 Another method of extinguishing capital by annual instal- ments is by creating a sinking fund which will increase by invest- ment. The sum of the investment of annual instalments with accrued interest is supposed to equal the capital at the end of the required period. 46 THE COST OF MINING PRESENT VALUE OF AN ANNUAL DIVIDEND OVER - YEARS AT - PER CENT. AND REPLACING CAPITAL BY REINVESTMENT OF AN ANNUAL SUM AT 4 PER CENT. Years 5 Per Cent. 6 Per Cent. 7 Per Cent. 8 Per Cent. 9 Per Cent. 10 Per Cent. 1 .95 .94 .93 .92 .92 .91 2 1.85 1.82 1.78 1.75 1.72 1.69 3 2.70 2.63 2.56 2.50 2.44 2.38 4 3.50 3.38 3.27 3.17 3.07 2.98 5 4.26 4.09 3.93 3.78 3.64 3.51 6 4.98 4.74 4.53 4.33 4.15 3.99 7 5.66 5.36 5.09 4.84 4.62 4.41 8 6.31 5.93 5.60 5.30 5.04 4.79 9 6.92 6.47 6.08 5.73 5.42 5.14 10 7.50 6.98 6.52 6.12 5.77 5.45 11 8.05 7.45 6.94 6.49 6.09 5.74 12 8.58 7.90 7.32 6.82 6.39 6.00 13 9.08 8.32 7.68 7.13 6.66 6.24 14 9.55 8.72 8.02 7.42 6.91 6.46 15 10.00 9.09 8.34 7.79 7.14 6.67 16 10.43 9.45 8.63 7.95 7.36 6.86 17 10.85 9.78 8.91 8.18 7.56 7.03 18 11.24 10.10 9.17 8.40 7.75 7.19 19 11.61 10.40 9.42 8.61 7.93 7.34 20 11.96 10.68 9.65 8.80 8.09 7.49 21 12.30 10.95 9.87 8.99 8.24 7.62 22 12.62 11.21 10.08 9.16 8.39 7.74 23 12.93 11.45 10.28 9.32 8.52 7.85 24 13.23 11.68 10.46 9.47 8.65 7.96 25 13.51 11.90 10.64 9.61 8.77 8.06 26 13.78 12.11 10.80 9.75 8.88 8.16 27 14.04 12.31 10.96 9.88 8.99 8.25 28 14.28 12.50 11.11 10.00 9.09 8.33 29 14.52 12.68 11.25 10.11 9.18 8.41 30 14.74 12.85 11.38 10.22 9.27 8.49 31 14.96 13.01 11.51 10.32 9.36 8.56 32 15.16 13.17 11.63 10.42 9.44 8.62 33 15.36 13.31 11.75 10.51 9.51 8.69 34 15.55 13.46 11.86 10.60 9.59 8.75 35 15.73 13.59 11.96 10.67 9.65 8.80 36 15.90 13.72 12.06 10.76 9.72 8.86 37 16.07 13.84 12.16 10.84 9.78 8.91 38 16.22 13.96 12.25 10.91 9.84 8.96 39 16.38 14.07 12.34 10.98 9.89 9.00 40 16.52 14.18 12.42 11.05 9.95 9.05 PARTIAL AND COMPLETE COSTS 47 Annual Rate of Dividend Number of years of life required to yield per cent interest, and in addition to fur- nish annual instalments which, if re-invested at 4 Per Cent, will return the original investment at the end of the period. Per Cent. 5 Per Cent. 6 Per Cent. 7 Per Cent. 8 Per Cent. 9 Per Cent. 10 Per Cent. 6 41.0 7 28.0 41.0 8 21.6 28.0 41.0 . 9 17.7 21.6 28.0 41.0 10 15.0 17.7 21.6 28.0 41.0 11 13.0 15.0 17.7 21.6 28.0 41.0 12 11.5 13.0 15.0 17.7 21.6 28.0 13 10.3 11.5 13.0 15.0 17.7 21.6 14 9.4 10.3 11.5 13.0 15.0 17.7 15 8.6 9.4 10.3 11.5 13.0 15.0 16 7.9 8.6 9.4 10.3 11.5 13.0 17 7.3 7.9 8.6 9.4 10.3 11.5 18 6.8 7.3 7.9 8.6 9.4 10.3 19 6.4 6.8 7.3 7.9 8.6 9.4 20 6.0 6.4 6.8 7.3 7.9 8.6 21 5.7 6.0 6.4 6.8 7.3 7.9 22 5.4 5.7 6.0 6.4 6.8 7.3 23 5.1 5.4 5.7 6.0 6.4 6.8 24 4.9 5.1 5.4 5.7 6.0 6.4 25 4.7 4.9 5.1 5.4 5.7 6.0 26 4.5 4.7 4.9 5.1 5.4 5.7 27 4.3 4.5 4.7 4.9 5.1 5.4 28 4.1 4.3 4.5 4.7 4.9 5.1 29 3.9 4.1 4.3 4.5 4.7 4.9 30 3.8 3.9 4.1 4.3 4.5 4.7 Let us now return to the problem of fixing the time for the amortization of invested capital. As remarked above, this is easy in the case of a worked-out mine. To do it accurately in the case of a living and prosperous mine is, frankly, impossible. But as this is a vital question for every investor it is absolutely necessary to give an answer, be it correct or not. For, whether the investor realizes it or not, he is always staking his capital on the probability of having it returned within a certain time. In other words, he is gambling on the life of the mine. If a man invests money in a mining stock which yields only 5 per cent, on 48 THE COST OF MINING 03 DQ O3 o3 jo | ^ || ^ ^ | S & 3 o fcjn 1 1 .9 1 i "2 , .s | h 03 "8 , c % ^'^ rt o;x^^ M 1 ^ 'fi o considered considered only, cost considered -y - fc 03 L 4J rfi H 13 111* S S It! B 45 03 4~> -t-J 1 1 3 ^iiliisj: .2 PH P-I PH PH 10 t^ uoijuioaadsQ puu uorj'czij -joui'y i{joq joj uoj, J3d ^503 T 1 o CD (M C5 8 CO c5 J-BJldB3 uo 'JU33 J3(j 9 Suimhssy c5 S CD s J? UOTJ -ezpjouiy ioj uoj^ J3d 5503 g o O CD T 1 CD oo d uoj, pnu 8 8 8 s 8 -uy J3d psAoidmg [E}idi33 *-< ^ ^ CO CD jsajsiui '1U33 J3j g -uop ,*, ^ HM 00 -Bzpjoiuy jo 3}i3^[ aiq'suosBS-g S-TCO^ '3JI1 jo uoijupsdxg 3|qBuos'-B3-g S o CO 8 8 s SJB3^ 'pssjuTja-cnQ sji^ 10 s 8 g g suoj^ '^ndjnQ pnuuy 1 1 | 1 1 o" o" rH 2 1 o" 1 I I suox 'iqSjs u; }unoiuy 8 3 8 rH '0 1 1 T I 1 s 1 o p bfi J5 W A;j3dojj jo 3ui^^[ fcJO Id g c3 I CQ s s s 5 CO PH x PH t> (H o3 *S "C fcJO hn o3 ft S, PUJSIQ JO 9UIB N tn !-H T> 3 02 O3 2 fi 0> aJ o3 5 03 I ^ * So paurp^; pu3^j\; jo pu;^ o s fi 1 1 fi "s &i PARTIAL AND COMPLETE COSTS 49 ? c3 0> .S ! 1 1 II * -2 ""* CQ O 0> ilHs |i CM CM iO iq co | 3 i 2 S 3 S 5 i 00 T-* O O i-H CO O O r- 1 32 3 r^ o o o oc i i c 1 OJ CO CD to ,-H (^ C ? 1 1 00 d d d *O | CM -H l> | o oo c | >O O O O CO T-H >O iO C^J **? OO^ I -H __, 1 ^H (N C CM C 3 2 \ ^ 1 s 1 1 1 l.s 10 1 1 1 2" 3 ^ a 1 P J p ^ II 1 ' III III III CM 1^ iO C 3~0" 1 5 iO 5 CM CM CM ^ ^g 5 c Q c d H Q, 8 8 C 5 fl 0) O gj QJ > cT > > > ^ o" ^ ^ I > 'Ebg 'So 'So' ? fr 1 III III 5 -4-3 ig * ^ ^ o c 5 >- CM C ^ |i g> O fl . e fe si ^ 1: u r 9 e o O ^"^ O ^^ jjl l| 1 1 111 1 ' gn J g 2 " | < J T3 o | O P P H PU ^ cS 2 S3 : :4j . J 'C A C/D . c8 ^^v o S o i oTNc. cjc.^.-^-- jj -3 O CH O ^ ^ " ^2 " ^ p pq Of |3S -s 1 1 1c< __; c>> -*^ Q) O *-H 3oP oDOO-^^a ^ .& c 5 o c rO '05 --^ o _S a a 02 *3^T3*5i cu -4.5 c '^ ^ 2 w s > 2 - fH^'^.S^-S^^S g g JH dOg>o M fl^ ^ o i C^ CQ o S Coal resources of the country Coal production of the world. THE following statistics on the production, growth, prices, and resources of the coal-mining industry of the United States is taken, with a few comments, from the pamphlet issued by the United States Geological Survey on the Production of Coal in 1907. It is not likely that any other statement to be had gives a truer perspective of the essential features of this business, which may justly be said to be one of the great fundamental elements of the prosperity of the nation. Nothing can be more important than that the public at large shall be acquainted with the real condition of this industry, for it is not unlikely that good public policy will require some changes in the conduct of it, and without the support of public opinion nothing beneficial can be done. COAL STATISTICS " The combined production of anthracite and bituminous coal in the United States in 1907 amounted to a little more than 480,360,000 short tons. " With an average of 30 cars of coal to the train, and of 50 tons to the car, the number of trains required to transport this product was 320,300, and the combined length of these trains would extend two and two-thirds times around the world at the equator. The hole left in the ground by the extraction of this fuel is equal to 17,585,000,000 cu ft., and if the entire quantity of coal extracted were built into one cube, it would have the dimen- sions of 2605 ft., or nearly half a mile on each edge. A rectan- gular column with a 1000-ft. base to represent the coal production of the United States in 1907 would extend nearly 3.4 miles into the air." 52 STATISTICS OF COAL PRODUCTION 53 " Some idea of the growth of the coal-mining industry within the last quarter of a century is shown by the fact that in 1907 the production was considerably more than double that of 1898, more than three times that of 1890, more than four times that of 1886, and considerably more than five times that of 1881. " Compared with 1906, when the total production amounted to 414,157,278 short tons, valued at $513,079,809, the output in 1907 showed an increase of 66,206,146 short tons, or 15.99 per cent, in quantity, and of $101,719,089, or 19.83 per cent, in value. Of this increase, 12,787,412 long tons, or 14,321,901 short tons, were in the production of Pennsylvania anthracite, and 51,884,- 245 tons in the production of bituminous, semi-bituminous, sub- bituminous, lignite, and scattering lots of anthracite. The value of the Pennsylvania anthracite production increased $31,666,362, and the total value of the other grades of coal showed an increase of $70,052,727. It is worthy of note that of the 31 states and territories of the Union in which coal was produced during 1907, there were only two which did not participate in the general increased production. The two exceptions were California and Oregon, both unimportant as coal-producing states, both on the Pacific coast, and the decrease in both states being due to the same cause the largely increased production of fuel oil in Cali- fornia and its use for railroad and manufacturing purposes. The percentages of increase in the various states ranged from 1.79 in Maryland to 51 in Michigan, and in only three cases where the production increased was the percentage of increase in value less than the percentage of increase in quantity. These three exceptions were Alabama, Illinois, and Indiana. The largest increase in quantity was in the production, of Pennsylvania bitu- minous coal, which showed an increase of 20,849,971 short tons, with a gain of $25,373,375 in value. Pennsylvania anthracite showed the next largest gain in quantity, the increase in this out- put being 14,321,901 short tons, while the gain in value exceeded that of Pennsylvania bituminous coal, amounting to $31,666,362. The total increase in Pennsylvania's production was 35,171,872 short tons, while the aggregate value of Pennsylvania's produc- tion showed a gain of $57,039,737. Illinois, the second state in coal-producing importance, was second in increased production, with a gain of 9,837,042 short tons in quantity and $9,924,320 in value. West Virginia, the third in producing importance, was 54 THE COST OF MINING third in increased production, with a gain of 4,801,233 short tons in quantity and $6,794,691 in value. Ohio, fourth in rank, was fourth in amount of increased output, showing a gain of 4,410,779 short tons and $4,978,166. The total increase in the production of anthracite and bituminous coal in the United States in 1907 was about 10 per cent, larger than the total coal pro- duction in 1877, thirty years before. " An interesting fact presented by the statistics of the produc- tion of coal in the United States is that in each decade the out- put has been practically doubled. Up to the close of 1865 the total production had amounted to 284,890,055 tons. In the decade from 1866 to 1875, inclusive, the production amounted to 419,425,104 tons, making the total production up to the close of 1875, 704,315,159 tons. In the following decade, from 1876 to 1885, inclusive, the production amounted to 847,760,319 tons, something more than double the total production up to the begin- ning of that decade. At the close of 1885 the total production amounted to 1,552,075,478 tons, and the production for the 10 years ending with 1895 was 1,586,098,641 tons, and the total production at the close of 1895 amounted to 3,138,174,119 short tons. In the decade ending December 31, 1905, the total pro- duction amounted to 2,832,402,746 short tons, and the grand total from the beginning of coal mining amounted to 5,970,576,- 865 short tons. The average annual production from 1896 to 1905 was 283,240,275 short tons, compared with which the aver- age production in 1906 and 1907 (447,260,351 short tons) shows an increase of 164,020,076 tons, or 58 per cent. " This great increase in the production of coal, when consid- ered with the increase in the population, furnishes some further interesting comparisons. Going back for a period of a little over 50 years, or to the middle of the last century, and comparing the statistics of coal production with the increased population, it is found that in 1850, according to the United States census for that year, the production of coal amounted to 6,445,681 tons, when the population of the country amounted to 23,191,876 persons. The per capita production of coal in that year is thus seen to have been 0.278 ton. In 1860, or 10 years later, the popu- lation was 31,443,321 persons, and the coal production amounted to 16,139,736 tons, or an average of 0.514 ton per person. At the census of 1$70 the population of the United States amounted STATISTICS OF COAL PRODUCTION 55 to 38,558,371; the coal production in that year amounted to 36,806,560 short tons, a per capita average of 0.96 ton. Ten years later, when the population was 50,189,209, the coal output amounted to 76,157,944 short tons, or 1.52 tons per capita. In 1890 the population had grown to 63,069,756, an increase of 25 per cent, over 1880, while the coal production had grown to 157,770,963 short tons, or a per capita output of 2.52 tons. At the taking of the Twelfth Census, in 1900, the increase in popula- tion amounted to 22 per cent., the total number of persons re- ported being 76,303,387, while more than 70 per cent, had been added to the coal production, with a total of 269,684,027 short tons, or an average of 3.53 tons for each inhabitant. In other words, while the population from 1850 to 1900 showed an increase of 230 per cent, the production of coal increased 4,084 per cent. The Director of the Bureau of the Census, Hon. S. N. D. North, estimates the population of the United States on June 1, 1907, at about 85,500,000 persons, making the per capita production in that year 5.6 tons; that is, in less than 60 years the per capita production of coal in this country has increased from a little more than a quarter of a ton to 5^ tons. It is true that in the earlier years the proportion of wood used for fuel was larger than it is to-day, but the actual consumption of wood at this time is little, if any, less than it was 50 years ago, and is probably greater. It must also be remembered that in addition to the great increase in the consumption of coal per head of population there has been a great increase in the use of oil for fuel purposes, while natural gas still remains an important factor in this regard. "The total number of men employed in the coal mines of the United States in 1907 was 680,492, against 640,780 in 1906 and 626,035 in 1905. Of the total number of men who were employed in 1907, 167,234 were employed in the anthracite mines of Penn- sylvania, while the bituminous and lignite mines gave employment to 513,258 men. In 1906 the anthracite mines gave employment to 162,355 men and in 1905 to 165,406 men. The bituminous workers numbered 478,425 in 1906 and 460,629 in 1905. The average number of days worked in the anthracite region in 1907 was 220, against an average of 195 in 1906 and 215 in 1905. The bituminous mines worked an average of 234 days in 1907, 213 days in 1906, and 211 days in 1905. The average production for each employee in the anthracite region of Pennsylvania in 1907 56 THE COST OF MINING CO f^ O5 00 O5 CO rH -ooc v Qc s qcooO'^'^corHO ^^t | Ttio i iOOcDLOC5(NOOCOO5'^COrH O CO O OOO5OcoCOrH CO rHOO . CO CO CO iO TJH OO O (N rH CO CO O (N O5 O5 TH CO CO rH rH rH t>- O O5 CO rH rf C^ rH O rH lj? !p S i W 10^ r^ o^ co" COrH-^l rHTfl rHOO O5rH o o co oo (N 05 l> 00 Tfl O CO O5 TP CO rfH 05 TJH >O rH O rH IO Tfl r-T co" > fl OTS .3 "3 fe S ?, S* .9 ? S ^ ^ '2 T3 ^_) CD fl 3 00 O PH H STATISTICS OF COAL PRODUCTION 57 CM CM o 10 05 5 I> ^f CM "* CO Oi O CO Oi CO 10 CM CO CO iO O O OS *O rH rH rH CM ' rH CO OO !> O5 00 CO 00 l> O 00 l> O O 1-1 (M ^ TP i 1 00 O5 IO CO 05 1> CO O I> O5 U5 r- CO *O CO ^ CO l> CO CO O5 CO t^ O> rH ^ l> CO O l>- (N 00 O (N rt< (M (N t^ O5 CO l> CO OS CO t>- UT> 10 t>- ^ O O5 T 1 IO iO CO OO O t O 00 00 CO rfi O CM CO CO O5 rH" rH" CM" CO" OT a 11 '11 g, CO (M CM O S'S- CM CM rH CO CM CO oT oo" . . te II |i - 'S 31 sr i 58 THE COST OF MINING- it STATISTICS OF COAL PRODUCTION 59 was 512 tons, against 439 tons in 1906 and 470 in 1905. The average production for each employee in the bituminous mines in 1907 was 769 tons, against 717 tons in 1906 and 684 tons in 1905. The average daily production per man in the anthracite region, which decreased from 2.41 tons in 1903 to 2.35 tons in 1904 and to 2.18 tons in 1905, increased to 2.25 tons in 1906 and to 2.33 tons in 1907. The average production per day by each employee in the bituminous mines, which increased steadily from 3.02 in 1903 to 3.15 in 1904 and to 3.24 in 1905 and 3.36 in 1908, fell off to 3.29 in 1907. TOTAL PRODUCTION OF COAL IN THE UNITED STATES FROM 1814 TO THE CLOSE OF 1907, IN SHORT TONS Pennsylvania Virginia Kentucky Illinois Ohio Pennsylvania Missouri Total A nthracite 1,931,510,321 57,229,152 122,404,574 645,868,309 492,769,358 Bituminous 1,846,069,253 97,618,106 Indiana Alabama Tennessee Iowa Arkansas North Carolina Maryland Washing- ton Total .... 159,440,390 164,734,310 84,304,601 141,608,792 23,756,401 476,805 147,606,548 43,108,697 Michigan Georgia California West Virginia Colorado Wyoming Kansas Utah Total 13,842,943 8,123,696 5,030.945 434,198,539 112,668,336 77,818,' 65 91,176,204 18,837,182 Oklahoma (Ind.T.) Oregon Montana New Mexico Texas North Dakota Miscella- neous 1 Total Total 39,845,015 1,790,392 24,739,133 22,325,432 14,444,948 2,784,258 38,966,162 6,865,097,567 The following table shows the variation in the average price of run of mine bituminous coal in the various states since 1903. For the year 1907 is added a column showing the output in tons per man per day. It will be seen that the price is roughly in inverse proportion to this output. It will be shown later that, given equivalent conditions, the labor cost is about the same throughout the country. It must be borne in mind that condi- 60 THE COST OF MINING AVERAGE PRICE PER SHORT TON FOR COAL AT THE MINES SINCE 1903, BY STATES AND TERRITORIES State or Territory 1903 1904 1905 1906 1907 Tons per Man per Day Alabama Arkansas California Colorado Georgia Idaho Illinois Indiana Iowa Kansas $1.22 1.51 (a) 2.86 .23 (6) .26 .10 .17 .23 .65 .52 $1.20 1.54 (a) 4.74 1.31 (6) 1.22 (c) 3.95 1.10 1.11 1.61 1.52 $1.21 1.49 (a) 4.97 1.22 (6) 1.29 (c) 3.03 1.06 1.05 1.56 1.46 $1.34 1.61 (a)2.55 1.26 1.28 (c) 3.93 1.08 .08 .60 .49 $1.29 1.68 (a) 3.81 1.40 1.38 (d) 4.10 1.07 1.08 1.62 1.52 2.75 2.76 2.94 3.59 3.30 2.11 2.62 Kentucky Maryland .06 .48 1.04 1.19 .99 1.14 .02 .19 1.06 1.20 2.98 3.58 Michigan Missouri Montana New Mexico .97 .61 .64 37 1.81 1.63 1.61 1 31 1.71 1.58 1.72 1.33 .80 .63 .77 .34 1.80 1.64 1.94 1.46 2.19 2.21 2.75 329 North Carolina . . . North Dakota .... Ohio () 1.50 1.29 () 1.43 1.09 () 1.34 1.04 .54 .09 1.61 1.10 Oklahoma (Indian Territory) Oregon Pennsylvania bitu- minous Tennessee . . . 1.82 2.43 1.18 1.25 1.82 2.18 .96 1 18 1.76 2.58 .96 1 14 1.92 2.66 1.00 1.22 2.04 2.34 1.04 1 25 2.01 3.61 2.44 Texas 1.62 1.66 1.64 1.66 1.69 1.61 Utah 1.20 1.30 1.35 1.36 1.52 3.43 Virginia Washington West Virginia Wyoming .96 1.69 1.17 1.24 .86 1.63 .88 1.30 .88 1.79 .86 1.31 .98 1.80 .95 1.31 1.02 2.09 .99 1.56 2.93 2.27 3.64 3.42 Total bituminous Pennsylvania an- thracite 1.24 2.04 1.10 1.90 1.06 1.83 1.11 1.85 1.14 1.91 General average 1.41 1.26 1.21 1.24 1.28 (a) Includes Alaska. (6) Includes North Carolina, (c) Includes Ne- braska, (d) Includes Nebraska and Nevada, (e) Included in Georgia. STATISTICS OF COAL PRODUCTION 61 tions that impose high costs of living will increase the labor cost. This is particularly evident in comparing the price of coal and the output per man in the Rocky Mountain states with those of the Mississippi Valley. COAL PRODUCTION IN THE CHIEF COUNTRIES OF THE WORLD (In metric tons of 2204 Ibs.) Countries 1904 1905 1906 1907 Asia: China 10,450,000 India 7,682,319 7,921,000 9,783,250 11,200,000 Japan . . . 11,600,000 11,895,000 12,500,000 12,890,000 Australia : New South Wales 6,116,126 6,035,250 7,748,384 7,850,000 New Zealand .... 1,562,443 1,415,000 1,600,000 1,784,000 Other Australia . . 769,723 805,000 870,000 900,000 Europe : Austria Hungary (c) 40,334,681 40,725,000 37,612,000 39,876,511 Belgium 23,380,025 21,844,200 23,610,740 23,824,499 France 34,502,289 36,048,264 34,313,645 37,022,556 Germany (c) 169,448,272 173,663,774 193,533,259 205,542,688 Italy 359,456 307,500 (e) 300,000 (e) 225,000 Russia 19,318,000 17,120,000 16,990,000 17,800,000 Spain (c) 3,123,540 3,199,911 3,284,576 (e) 3,250,000 Sweden 320,984 331,500 (e) 265,000 \*S ujuwj \j\s\j 305,000 United Kingdom . 236,147,125 239,888,928 251,050,809 267,828,276 North America : Canada Western 2,619,816 3,183,909 3,717,816 4,780,301 Eastern 4,194,939 4,775,802 6,196,360 5,730,060 United States 318,275,920 351,120,625 375,397,204 430,430,183 South Africa (a) . . 3,015,000 3,218,500 (e) 3,900,000 3,945,043 Other countries (e) 4,250,000 4,550,000 5,500,000 3,475,780 Total . 867,020,658 928,049,163 988,173,043 1,089,110,496 (a) Transvaal, Natal and Cape of Good Hope, (c) Includes lignite. (e) Estimated. 62 THE COST OF MINING AREAS, ESTIMATED TONNAGE, AND PRODUCTION OF [A = Anthracite. B = Bituminous. State and Field AREA IN SQUARE MILES Kind of Coal Estimated Orig- inal Coal Supply in Short Tons. Coal Both Easily- Accessible and Accessible with Difficulty PRODUCTION m SHORT TONS Contain- ing Work- able Coals May Con- tain Work- able Coals Coal Under Heavy Cover 1906 Total to January 1, "1908, In- cluding Waste Alabama: Warrior and Plateau fields 7,845 325 260 6,000 B B B L 63,513,000.000 2,994,000,000 2,396,000,000 11,301,993 1,635,907 170,063 Cahaba field Coosa field Lignite field Total 8,430 30 1.584 100 6,000 5,900 B B L 68,903,000,000 60,000,000 1,797,000,000 90.000,000 13,107,963 1 1,934,673 247,000,000 Arkansas : Bituminous field Lignite field Total 1,684 500? 600 1,380 20 1,080 6,000 700 350 5,900 3,700 480 520 2,300 S, B S B. S S B B, A B, S A B, S 1,887,000,000 1,000,000,000 13,590,000,000 21,428,000,000 453,000,000 24,462,000,000 271,810,000,000 39,639,000,000 388,000,000 25,290 1,544,776 177,718 1,300 6,572,673 1,143,310 5,407 666,034 36,000,000 7,000,000 Colorado: Denver region North Park field Trinidad field Uinta region Yampa field Scattered fields Total 10,130 167 200 4,180 I 200 2,820 B S, B B B B B B B 371,770,000,000 10,111 218 169,000,000 12,000,000 968,000,000 239 000 000 933,000,000 600,000,000 240 000 000 000 353,548 5,882 38 434 363 Idaho 35,600 6,500 12.560 3,100 10,270 6,400 5,640 15,780 Indiana 44,169,000,000 29,160,000,000 7,022,000,000 67,787,000,000 36,241,000,000 11 895 252 6,798,609 6,423,979 3,768,651 5,884,996 212,000,000 136,000,000 Kentucky: Eastern Kentucky Western Kentucky .... Total 16,670 8,800 455 11,000 7,500 16,700 32,300 754 47 516 450 6,300 6,100 100 2,500 8,000 875 L B B L B V s B S B S. L 104,028,000,000 8,044,000,000 12,000,000,000 40,000,000,000 279,500,000,000 6,560,000,000 2,000,000,000 2,000,000,000 10,000,000,000 3,000,000,000 9,653,647 5,108,539 1,473,211 3,983,378 557,148 1,058,763 13,550 200,460 184,000,000 221,000,000 21,000,000 146,000,000 Maryland Mississippi Montana: Fort Union region . . . Bull Mountain field . . . Red Lodge and Bridger fields... Judith Basin region . . . Assinniboine region . . . Yellowstone region . . . Scattered fields Total New Mexico: Raton field 34,067 1,360 11,600 375 17,575 5,000 B S B, A, S 303,060,000,000 30,805,000,000 131,375,000,000 1,600,000,000 1,829,921 1,292,241 604,517 67,955 37,000,000 San Juan region Scattered fields Total 13,335 5,000 163,780,000,000 1,964,713 33,000,000 STATISTICS OF COAL PRODUCTION 63 THE VARIOUS COAL-FIELDS OF THE UNITED STATES S = Sub-bituminous. L = Lignite] State and Field AREA IN SQUARE MILES Kind of Coal Estimaed Origi- nal Coal Supply in Short Tons, Coal Both Easily Accessible and Accessible with Difficulty PRODUCTION IN SHORT TONS Contain- ing Work- able Coals May Contain Work- able Coals Coal Under Heavy Cover 1906 Total to Januarv 1, 1908. Includ- ing Waste North Carolina 60 31,240 3,900 360 B L L 200,000,000 500,000,000,000 317,542 1,000,000 North Dakota: Turtle Mountain field . . Total 31,240 12,660 10,000 230 480 14,200 4,260 B B S A B 500,000,000,000 86,028,000,000 79,278,000,000 1,000,000,000 21,000,000,000 112,574,000,000 317,542 25,552,950 2,924,427 109,641 71,282,411 129,293,206 4,000,000 739,000.000 60,000,0000 2,000,000 Ohio Oklahoma Pennsylvania : Anthracite region Bituminous fields Total 14,680 2,000 4,400 1.000 4,000 L B L 133,574,000,000 10,000,000,000 25,665,000,000 200,575,617 5,766,690 5,652,000,000 South Dakota Tennessee: Bituminous fields Lignite fields Total Texas : Bituminous fields Lignite fields 5,400 8,200 2,000 5,300 53,000 B L 25,665,000,000 8,000,000,000 23,000,000,000 5,766,690 839,985 472,888 126,000,000 Total Utah: Uinta region Southwestern Utah 10,200 9,990 3,140 58,300 1,500 500 B B, A B, S 31,000,000,000 150,970,000,000 45,438,000,000 50,000,000 1,312,873 1,701,674 70,877 22,000,000 Scattered fields Total Virginia : Southwestern fields .... Brushy Mountain fields Richmond fields Total 13,130 1,550 200 150 2,000 B B 196,458,000,000 21,000,000,000 900,000,000 600,000,000 1,772,551 4,205,019 49,860 28,000,000 1,900 1,100 17,000 11,530 905 1,435 4,855 1,073 320 450 3,060 430 240 1.350 960 200 2,830 290 20,750 115 B, S B S S S B, S B, S B S 22,500,000,000 20,000,000,000 231,039,000,000 174,600,000,000 1,000,000,000 33,000,000,000 199,152,000,000 16,000,000,000 133,000,000 200,000,000 4,254,879 2,864,926 87,791,580 1,091,499 5,451 450,636 2,122,253 2,078,772 385,383 86,000,000 64,000,000 650,000,000 Washington West Virginia Wyoming: Fort Union region .... Bighorn Basin region . . Hanna field Green River region . . . Hams Fork region .... Black Hills region .... Scattered fields Total Total for United States 20,568 327,596 6,240 137,375 23,985 31,805 - 424,085,000,000 6,133,994 116,000,000 10,218,000,000 3,157,243,000,000 414,157,278 CHAPTER V COST OF MINING COAL Importance of the business Factors governing costs Price of wages a result of efficiency Price and cost of coal in various States Esti- mates of cost for various places Pittsburgh Coal Company Capital charges 'Details of cost of coking coal in Virginia Illinois field Coke manufacture and anthracite mining Cost of coke Cost of anthracite Philadelphia and Reading Coal and Iron Company Chance's chart of costs according to thickness Public policy in coal mining Causes of waste Limitation of waste a question of the value put on coal Desirability of extensive consolidations Capital required for coal-mining expansion. MODERN civilization is propelled by the annual combustion of upward of 1,200,000,000 tons of coal. This vast use of power other than human or animal muscle is the basic fact in the might- iest revolution in industry, in art, and in habits that the human race ever experienced. Every time we press a button to turn on an electric light, every time we enter an elevator or a street car, we participate not only in a human revolution, but in a great geologic fact; for the mining and destruction of coal removes some of the important strata of the earth's crust. Coal mining is the basis and dependence of other kinds of mining just as it is of other industries. And farther, since coal mining is one of the simplest and commonest of mining opera- tions, it serves as a standard by which the complexity and cost of other kinds of mining may be appraised. If coal were not so abundant and widespread its use could not, of course, be so extensive and fundamental. The fact of its wide distribution is the most powerful element in the con- duct of the business. If coal were not cheap it could not be so extensively used; it would not, therefore, be so valuable. But because it is cheap it is often wasted; it is cheap because it can be offered in the market by innumerable competitors, whose aim is not the wise use of coal, but ready money profit from it. Hence 64 COST OF MINING COAL 65 this most valuable of mineral resources has been in considerable measure crudely and greedily exploited. The cost of coal to the consumer depends on two elements that vary widely: (1) Mining and (2), Transportation; but since the effect of the latter is self-evident, I do not propose to discuss it. FACTORS THAT INFLUENCE COST OF MINING I. The cost of mining coal depends, in my judgment, upon the following factors: (a) The thickness of the seam. (6) The purity of the coal in the seam. (c) The regularity of the seam. (d) The geological attitude as regards angle of dip, occurrence of faults, etc. (e) The climate, cost of living, etc. (/) The depth. (g} The amount of water to be pumped. (h) The solidity of the roof. (i) The presence of gas, dust, or other elements of danger. (/) Topography of the surface. Some other factors may influence the cost in a minor degree ; such as the hardness of rock encountered in development work, hardness of coal, cost of supplies, etc. It will be noted that I have mentioned only natural condi- tions, leaving out the factor that many would be inclined to place first on the list the rate of wages. I do not believe that this is a factor at all. The price of labor is determined by the natural factors. It is an effect, not a cause, in the economy of mining. If we have two neighboring districts with the same natural advantages, but in which the rates of wages are differ- ent, that difference is apparent, not real. The difference will be equalized by the supply and demand for labor as automati- cally as water runs down hill. If a mine pays lower wages than its neighbor it will have poorer men; if other conditions are the same, the cost will be the same. You cannot change this natural law; it is like the force of gravity. LABOR COST AND WAGES rhope that no one will understand this dictum to mean that where natural conditions are the same, the wages will be the same, 66 THE COST OF MINING or that the cost of labor will be the same; on the contrary, these things vary a good deal. Management, scale of operations, appliances of all kinds vary, or may vary, almost without limit among various enterprises. These factors help to establish wages and labor costs; they are quite independent both of natural con- ditions and of labor conditions, and have to do with the success or failure of enterprises. They introduce variations in cost that are, or may be, equal to the margin of profit that there is in the business. How LABOR COSTS MAY DIFFER WITH SAME RATE OF WAGES To elaborate a little, let us suppose that Smith and Jones are two rival operators in neighboring coal mines in which the nat- ural conditions are exactly the same and in which coal is salable at $1 per ton. There are only two mines in the district and each can produce twice its actual tonnage. Smith is a good operator, with sufficient capital, equipment, development and ventilation. He can mine coal for 60 cents per ton. Jones is a poor operator, and his mine is poorly opened. It costs him $1 per ton to pro- duce coal. It is obvious that the successful and opulent Smith has the decision as to how great a difference there shall be in labor costs in that district. He can prevent Jones from making a profit, and can close him down by selling coal under $1 per ton, which is Jones's cost. It is obvious that the difference between labor costs here will be approximately as 6 is to 10. This is not due to the rate of wages; it is just the difference between Smith and Jones. How WAGES MAY DIFFER AND COSTS BE THE SAME Now let us suppose that Smith and Jones are 2000 miles apart and each sells his coal at a point midway between them with equal transportation costs. Smith can supply the market and so can Jones, and each wants to sell all he can, and can produce all he can sell. Smith can sell without loss as low as 60 cents per ton. Jones, if he pays as much wages as Smith, cannot sell for less than $1. Neither Jones nor his employees know any- thing of Smith's superior methods and appliances, and they have no means of living except by selling coal. Obviously under these conditions there is only one thing to do work for less money. So Jones fixes his wages at 60 per cent, of Smith's wages COST OF MINING COAL 67 and continues business. This rate is fixed by the efficiency of Jones as against Smith. His men get just what they earn. In other words, the final result is exactly the same as if each laborer were in business for himself. ACTUAL COSTS Returning now to the natural factors that govern the cost of coal mining, we find that their number and importance is very considerable, and if all coal were to be mined we should have enormous differences of cost. As a matter of fact, these great differences do not at present exist because the commercial condi- tions of the country cause the elimination of all mines except those favorable for cheap working. This results from the fact that there is in this country, according to the U. S. Geological Survey, 2,000,000,000,000 tons of coal of all kinds easily acces- sible. This coal is spread over an area of 500,000 sq. m., and may be attacked at many thousand favorable points. The unfa- vorable seams will have to await to be worked after the better ones are exhausted. PRICE OF COAL AT MINES According to the excellent review of the "Production of Coal" for 1907, published by the U. S. Geological Survey, the extreme variation in the price of coal at the mines in the various States is only from 99 cents in West Virginia to $4.10 in Idaho. The last figure is for only 7500 tons and doubtless represents a case where an isolated but unfavorable seam may be worked because high transportation charges prevent the introduction of coal from other places. Leaving out such abnormal cases and con- sidering only States where the output reaches 1 per cent, of the production of the country, we find that the price of bituminous coal at the mines varies only between 99 cents for West Virginia to $1.68 for Arkansas. Pennsylvania anthracite is valued at $1.91, but I shall explain later that the cost of anthracite is radically different from that of bituminous coal and no compari- son should be made except with very careful explanation. It is probable that the figures of average price of coal at the mines give the best general idea to be had of the cost^of mining throughout the country. The price, of course, exceeds the cost, but it can be confidently asserted that the difference is not over 68 THE COST OF MINING 10 to 15 cents per ton, if we consider the whole output of States. Within given fields there must be considerable variation; some mines working cheaply and with large profits, while others have no profits at all, and some, if all capital charges were cor- rectly made against them, would be found running at a loss. But it is quite obvious that the entire industry cannot run at a loss and that the average complete cost must fall inside the aver- age selling price. It is difficult to get specific figures that will illuminate the general subject as accurately as the broad figures published by the Survey, and I doubt if we can form a better idea of average costs than by assuming them to be 90 per cent, of the selling price. This assumption gives us the following for bituminous coal: SELLING AND COST PRICES OF BITUMINOUS COAL RUN OF MINE. 1903. 1904. 1905. 1906. 1907 U.S. price $1.24 $1.10 $1.06 $1.11 $1.14 Cost 1.11 0.99 0.95 1.00 1.00 United States average price for 5 years, $1.13; estimated cost, $1.00. Esti- 1907 mated Price. Cost. Pennsylvania $1.03 j $0.93 West Virginia 0.99 . . , . 0.90 ,, , , i or> Appalachian Maryland 1.20 \ \T. , 1.08 Virginia 1.02 0.91 Kentucky 1.06 J 0.95 Illinois 1.07 Illinois field. 0.96 Alabama 1.29 Southern field. 1.17 Arkansas 1.68 Ozark field. 1.50 Colorado 1.40 1.26 Wyoming 1.56 Rocky 1.40 Utah 1.52 Mountain 1.37 New Mexico 1.46 field. 1.31 Washington 2.09 Puget Sound field. 1.88 Michigan 1.80 Michigan field. 1.62 These costs are intended to be complete, that is, to cover both operating and capital charges. I shall endeavor to give some reasons for believing them to be fairly accurate, but first let me disavow any intention of applying them to any particular property or district. It would be more enlightening, possibly, to take some detailed statements of costs and compare and digest COST OF MINING COAL 69 them. But such statements are hard to get and I must confess that those I have been able to secure are open to grave question as to their accuracy. For instance, I have the statements of a coal company operating three different mines. Detailed state- ments of operating costs for each month for each mine are given for a period of years. The aggregate tonnage and total operating cost may be figured out only with great labor. To get five years' operation averaged, I should have to combine 180 different cost statements. If this were necessary to secure the facts, one might be heroic enough to do it, but, after all, it would only give the results of an insignificant fragment of a single field and a single management. But far worse than this, after making this com- pilation, I should still doubt its accuracy because a single glance at the balance sheet reveals the fact that in mining 1,000,000 tons of coal, $350,000 has been added to capital charges. The writing off of such charges is a matter of judgment, based on familiarity with the property itself. I cannot possibly supply either the time or the experience required to form a judgment of my own as to this rate of depreciation, and yet, in a business of narrow margin like that of bituminous coal, it is a matter of great importance whether 1 cent, or 5 cents, or 15 cents per ton must be added for depreciation. It is interesting to note that E. V. d'lnvilliers, in his article on " Estimated Costs of Mining and Coking" (Trans. A. I. M. E., Vol. XXXV, 1905) shares the same difficulty in arriving at true costs for coal-mining operations. He expresses himself as fol- lows: "The cost of coal delivered to an oven, and the cost of the manufactured product, depends largely upon individual judgment or practice, and on general management. Therefore, without having access to the accounts of a number of individual mines, it is not possible to do more than approximate the average regional cost of mining coal or manufacturing coke. . . . For, though each plant in a district may be mining upon the same scale of wages, the computation of net mining costs may differ to a considerable extent in two adjoining plants, due to different methods of bookkeeping, to a difference of opinion as to what items are properly chargeable to mining account and to capital account, or to physical difference at the two mines." Mr. d'lnvilliers goes on to estimate the real cost of mining and coking at Connellsville and at Reynoldsville, Penn., the first 70 THE COST OF MINING a slope mine, largely self-draining, on a seam capable of produc- ing 9000 gross tons (10,000 short tons) to the acre; the second a shaft mine where considerable pumping will be required and capable of producing 7200 gross tons (8000 short tons) per acre. His estimate per gross ton is as follows: Mining Coal. Roy- Total. Cost. alty. Reynoldsville $0.66 $0.86 $0.04 $0.90 Connellsville 0.34 0.52 0.08 0.60 Reducing this to a short-ton basis we find that Mr. d'Invilliers's estimate of total cost is : Reynoldsville 80 cents Connellsville 53 cents These figures are for January, 1904. I find that for that year the average price of bituminous coal in Pennsylvania is reported at 96 cents. My arbitrary estimate for cost of 90 per cent, of the price gives us 86 cents for that year. Now, since it would seem that the Reynoldsville mine represents conditions not far from average in the Pennsylvania bituminous-coal regions, it appears that the difference between my estimate and Mr. d'Invilliers's estimate is not so great, but that it might all be covered by a difference of judgment between two men in "what is chargeable to operating account." PITTSBURGH COAL COMPANY The reports of the Pittsburgh Coal Company, which operates sixty mines in the neighborhood of Pittsburg, so situated that they must represent nearly average conditions for the Pennsyl- vania bituminous field, show the following: The average number of short tons mined per acre is 7000. Net profits for eight years average 13.8 cents per ton. The total cost for all capital charges is 16.2 cents per ton. If we assume that the U. S. Geological Sur- vey figures for the value of coal at the mines will hold good for the Pittsburgh Coal Company, we get the following, per short ton : Average price of coal for 5 years $1.03 Cost Capital charges 16.2 cents Operating charges 73.0 cents 0.892 Profit 0.138 $1.030 COST OF MINING COAL 71 Similarly the Monongahela River Consolidated Coal and Coke Company, also operating near Pittsburg, with an extraction of 8000 tons per acre, shows the following for nine years: Assume price of coal as before $1.03 Cost Capital charges 0.17 cents Operating charges 0.74 cents 0.91 Profit 0.12 $1.03 CAPITAL CHARGES Without going into further tables of figures I find that in Pennsylvania the capital charges may be calculated as follows: A charge of 5 cents per ton is made arbitrarily to cover the deple- tion of coal lands. If the property is bonded, this 5 cents per ton is put into a sinking fund to retire the bonds. In addition, current interest must be paid on capital or bonds. This charge will be in some proportion to the amount of unmined coal lands held for the future. Thus, if a company has a coal reserve for 100 years on its capital account, its interest charges must be greater than if its reserves are only enough for 20 years. It appears that it requires approximately $1 per ton of annual product to equip a coal mine for operation. Thus, for an out- put of 1,000,000 tons per year $1,000,000 will be needed for plant and equipment. The renewal or depreciation of this plant will cost 6 per cent, per year. In summary, then, we have: For coal in the ground . 5 cents For interest on $1 capital 5 cents For depreciation of same capital 6 cents Total 16 cents It is self-evident that the operating costs will vary more than capital costs; probably about in proportion to the total. Thus, if we find at one mine total costs of 96 cents, of which 16 cents is for capital and 80 cents for operating, we would probably find that at another mine where the total cost is only 72 cents, the cost would be 60 cents for operating and 12 cents for capital. My reason for believing this is that a mine that is cheap to work must also be cheap to open. While I am inclined to think that under present or recent conditions, the average cost of bituminous coal in Pennsylvania 72 THE COST OF MINING \ is 90 cents or more, there is reason to believe that some of the most favorable mines work much cheaper. Mr. Gary, in his recent testimony before the Ways and Means Committee on tariff revision, states that the cost of coke at the ovens, presumably at Connellsville, chiefly, was, in 1906, $1.75 per ton, on which there was 54 cents profit. This reduces the cost of coke to $1.21. If the burning of the coke costs 31 cents, we have left 90 cents for the coal, of which 1J tons are required per ton of coke. This figures the cost of coal at the mines of the U. S. Steel Corporation down to 60 cents per ton. Presum- ably this includes a sufficient allowance for depreciation. If so, the cost seems remarkably low and probably represents the cost of bituminous coal under the most favorable conditions At any rate it agrees pretty well with Mr. d'Invilliers's figures for a representative Connellsville mine. Certain other figures given by Mr. Gary about costs are of interest. He says that wages of all classes at coal and coke plants belonging to the U. S. Steel Corporation in 1908 averaged $2.39 per day. Now at coal mines labor is usually about 75 per cent, of the total expense; we may, therefore, calculate that the whole cost per man per day is about $3.20. If coal is mined for 60 cents per ton there must be an output of about 5J tons for every man. In the State of Pennsylvania at large, the output is only 3.6 tons per man. If this output is obtained at a total cost of $3.20, then the cost per ton is 89 cents.' This agrees with my other figures for Pennsylvania. Let us apply this reasoning to other coal fields and see how close it brings us to my estimate of cost at 90 per cent, of the selling price. In Michigan the wages are undoubtedly about the same as in Pennsylvania. I have estimated the cost of Michigan coal at $1.62 per ton. The output per man per day is $2.11. If we divide $3.20 by this amount we get $1.52. Again, in Wyoming I am informed that wages of coal miners average about $3.60 per day. If this is 75 per cent, of the whole cost per man, that cost is $4.80 per day. The output per man averaged in 1907, 3.42 tons; the cost per ton, therefore, should be $1.40. This is exactly my estimate by the 90-per cent. rule. I have no information as to the average wages of coal miners in Colorado, but some light can be had on costs there from COST OF MINING COAL 73 another source. The average value of coal at the mines in that State in 1907 is given at $1.40. My 90-per cent, rule gives a cost of $1.26. The Colorado Fuel and Iron Company mined that year about 4,500,000 tons of coal at a profit of $900,000, or 20 cents per ton. This profit was not altogether on mining since some of the coal was sold at a distance from the mines. Besides this the profits were diminished by certain fixed charges, of which the exact pro- portion belonging to the fuel department is not clear. At any rate it seems that the net profits on coal from mining were not over 10 cents. If, then, the U. S. Geological Survey is right in its average price of coal, the actual cost must have been about $1.30. Following are some more detailed figures on the cost of opera- ting a slope mine, self -draining in Virginia. The figures are com- plete in all respects except that of depreciation. I am in doubt whether that item is fully taken care of, but having no means of forming an individual opinion, I cannot express one. The seam averages 7 ft. thick: COST SHEET AT A VIRGINIA COLLIERY 1905- 1906- 1906. 1907. Per Ton. Per Ton. Mining $0.246 $0.251 Timbering 0.010 0.018 Ventilation 0.008 0.010 Removing refuse and deposit 0.005 0.017 Tracks 0.030 0.031 Haulage 0.067 0.102 Dumpage 0.009 0.012 Blacksmith shop 0.006 0.007 Repairs 0.009 0.008 Supplies 0.007 0.003 Salaries Plant 0.017 0.019 Switching 0.005 0.006 Engineering 0.003 0.005 Extraordinary expenses 0.007 0.011 Adjustment stables account 0.005 Sinking fund 0.100 0.100 Attorneys' fees and legal expenses 0.025 0.016 General expense 0.014 0.012 Salaries General office 0.040 0.058 Interest and discount 0.073 068 Taxes 0.011 0.011 Insurance 0.005 0.005 $0.702 $0.770 74 THE COST OF MINING Summary: Labor $0.382 0.423 Supplies 0.052 0.077 Sinking fund 0.100 0.100 $0.534 $0.600 General expense 0.056 0.070 Interest, insurance, taxes, attorneys' fees. . 0.112 0.100 $0.702 $0.770 Tons mined 240,371 221,552 It is interesting to note the increased cost in 1907 over 1906, due to the unhealthy pre-panic business conditions. The following table shows the estimated cost of coal mining in various parts of the Illinois field, according to Mr. George S. Rice. The only comment I can make is that the estimates for depreciation and amortization seem rather low. ESTIMATE OF COST OF R. OF M. COAL IN ILLINOIS, AVERAGE CONDITIONS. Northern 111. Middle 111. Southern 111 . 150 000 Tons 250,000 Tons 250,000 Tons Yearly Output Labor Sup. Labor Sup. Labor Sup. Mining (paid to miners "pick rate") 87 55 ' 48 Narrow work (entry driving and passing through rolls, etc.) i J 4 1 3 1 Care of mine (maintenance of roads, roof falls timbering etc ) 15 5 1 7 1 3 1 6 2 Haulage 8 2 5 1 4 1 Hoisting and loading and care of mine top 2 3 2 2 1 2 1 Steam 1 2 1 1 1 1 Mine management 2 1 li i U i 1.165 .125 .765 .065 .655 .065 1.165 .765 .655 Total mine cost 1 29 83 72 [Depreciation and ~ , amortization .... General costs {,-,. Selling 5 2 I 3 2 I 2 2 Gen'l management . 2 2 2 Grand total 1.38 .90 .78 1 Chiefly timber and ties. 2 These costs or the subdivision of care of mine top will run high unless the mine runs fairly steady. COST OF MINING COAL 75 COKE MANUFACTURE AND ANTHRACITE MINING The production of commercial anthracite is so different a problem from that of mining bituminous coal that its cost is nearly parallel to that of coke. Run-of-mine anthracite is worth- less for fuel. It will not burn unless it is carefully sized. It will not burn if there is even a moderate mixture of slate or bone in it. The sizing and rejection of impurities necessitates careful crushing, sizing and washing. It is distinctly a process of concentration as well as of sizing, for the loss in the " break- ers" will average fully one-third of the run-of-mine tonnage. The cost of concentrating, or operating the breakers, is from 30 to 50 cents per ton shipped not cheap milling by any means, and no doubt mining men not acquainted with the fact will be surprised at it. The comparison may be tabulated as follows : Coke. Anthracite. Tons run-of-mine per ton .... H H Cost of manufacture per ton . . 30 cents to 60 cents 30 cents to 50 cents Several instances of actual figures for coke have come to my attention. Mr. d'Invilliers calculated average results at two Pennsylvania points for five years ending 1903 as follows: CONNELLSVILLE REGION PLANT OF 500 OVENS Coal, l\ tons, at 56 cents net ton $0.840 Charging, leveling, drawing and labor 0.326 Salaries, supplies and depreciation 0.050 Total SL216 It will be noted that I deduce from Mr. Gary's evidence that the actual cost of coke in Connellsville to the steel company in 1906 was $1.21. REYNOLDSVILLE PLANT OF 500 OVENS Coal, 1.7 tons, at 70 cents $1.19 Charging, leveling, drawing and labor 0.40 Salaries, supplies and depreciation 0-05 $1.64 In neither of these cases have I used any table exactly as given by Mr. d'Invilliers. He does not give the details of his estimates for a five-year average, and I have endeavored to 76 THE COST OF MINING supply them. There seems to be some mistake in his average of Reynoldsville costs, for they do not work out in proportion as he gives them. Another example of coke costs more in detail is from a 200- oven hand-operated plant in Virginia in 1906: Cost of coal, 70.2 cents per ton 1.027 Coal used in making coke . 1.027 Crushing , 0.023 Charging 0.033 Leveling and sealing 0.028 Drawing 0.210 Loading 0.134 Switching 0.023 Salaries at plant 0.033 Tracks 0.008 Repairs 0.021 Supplies 0.012 Extraordinary expense 0.006 Insurance 0.001 Total 1.561 In summary: Raw material 1.027 Labor 0.459 Supplies 0.075 1.561 The following year, 1907, the costs at the same plant were as follows : Raw material $1 .227 Labor 0.524 Supplies 0.114 Total $1.865 ANTHRACITE MINING The extraction of run-of-mine anthracite is rather more expensive than that of bituminous coal, chiefly because the anthra- cite seams are very much more folded. It is necessary to do vastly more development work in rock, and necessary also to use more timber in supporting gangways than is the case in flat seams. Moreover, the constantly changing dip prevents the use of uniform methods throughout the mines. On the other hand, the coal often occurs in magnificent thick seams. The COST OF MINING COAL 77 actual difference in cost for run-of-mine I do not estimate at more than 10 cents per ton, 92 cents for bituminous and $1.02 for anthracite (per short ton, the long ton is used at the mines) . Below will be found consecutive statements of the costs of the Philadelphia & Reading Coal and Iron Company for a period of years. These tables in the main explain themselves, but it is worth while to make the following comments: The actual cost of mining and repairs will be seen to average about $1.80 per long ton, equivalent to about $1.60 per short ton. This is for current operating only, but it includes the cost of putting the coal through the breakers, and it is a cost based on the finished product which may be calculated to be only two-thirds the run- of-mine product. Details for cost of breaking are not given, but from inquiries made in the region, it seems that 40 cents per ton is an average. Deducting this sum we get $1.20 for mining alone, and this is for mining 1^ tons of run-of-mine coal. The actual cost, then, per ton of run-of-mine to this company seems to be some 80 cents per short ton. The capital and general charges that follow in the statements largely explain themselves. The only item to which I wish to draw special attention is that of improvements, which is regularly charged in as an operating cost. This is entirely as it should be, and the charge is doubtless based on the theory that the annual improvements to plant are sufficient to cover the renewal of equip- ment. The company has charged to improvements and equip- ments at collieries $13,092,635. This is equivalent to about $1.30 per ton on .its annual output. Some companies would have charged a much larger amount to this item. The amount has not been increased in recent years in spite of the fact that since 1902 the output has increased 50 per cent. It is usual to charge off for depreciation at coal mines 6 per cent, of the capital em- ployed in the plant and equipment. In the case of the Reading company such a sum would have been sufficient in 1902, but would fall far short of the charges made in 1908. As costs are usually calculated, therefore, it would seem that this company is writing off somewhat more for depreciation than is strictly neces- sary. It would be obviously logical for the company to hold on its balance sheet a greater capital for an output of 10,000,000 tons per year than for an output of only 7,000,000 tons. 78 THE COST OF MINING S8 rH" O O O 00 -H (M rH p p odd CO C^l 00 ^f CO !> O 00 CO t~~- O5 O5 O5 1C i i ooc c^ S 2 5 CO iO CO rH O5 I O5 co co o C^TfiiO-'t' 05 ^ iOt^ 05 05 r-H t^* CO CO *O >-O OS tO Tj^ t^* O^ tO r H Tt^ O5 T-H t^ CO (N CO ^ rH 00 rH~ CO CO rH 05 tOtCOO OOOr-iO rH^HlO^H COCOTfO t^ CO CO iO i ( CO OOCO rHO ICI^CVI C005CO rH 05 IO 05 rH O5 '' ~ O5 O r- 1 O (N C^l CO (M ^ t>. O -H (N (M TF CO oo CO CO Tt^ rfl l> (M CO CO ^ l> CO TP 00 CO O5 CO^ CO o r x O dx s & 33 > -a sga ! 73 I &| I Q S o oo co ic O CO O5 CO CO - - - CO 1-H E 3 1C o oo >: ^ .S^ Pn'S fl ^ .2 > s s "3 ^ e g 5 o ^ -9 I 52 -^ o ^ t> ^^ ^ 1 HI g a u m G O g J J^g S73^^3 ^ax5^c!^ rt FIG. 7. Sketch showing arrangement of orebodies, in Bisbee, Arizona where 1 foot of development work opens 11 tons of ore. v tory drifts is used. Though the timbering of worked-out por- tions of the mine is thus enforced, so violent is the movement of the ground that the timbers are dislocated or crushed to chips. ] About 30 ft. board measure of timber (from Puget Sound) is buried in the mine to the ton of ore extracted." This is a ter- rific cost for timber. At an average price of $24 per M. delivered at the mine, we have on this basis 75 cents a ton for timber alone. From 7 to 10 tons of ore are extracted per foot of opening work. A large part of the exploratory openings have to be closely timbered, and the cost for this work is high. The reason for the conditions described will appear very VARIOUS COPPER MINES OF ARIZONA AND MEXICO 185 plainly from a consideration of the structural relations of the orebodies. Dr. Douglas says: "With regard to ledge matter and the oxidized ore, my own opinion is that they are the pro- duct of replacement and local concentration; that where there is ledge matter to-day there was, originally, more or less com- pact iron pyrites carrying a small percentage of copper; and that during the process of alteration not only did the ferruginous solutions of alumina replace the pyrites, but the copper, by a process of segregation akin to crystallization, was concentrated and collected into areas of limited size, thus constituting the com- paratively small bodies of oxidized ores which are disseminated irregularly through the very large masses of ledge matter. As the outline of the masses of ledge matter has never been traced, it is impossible to determine their actual size, but approximately there has been exposed above the 400-ft. level not less than 10,- 000,000 tons of ledge matter." Since at the time this was writ- ten not much over 1,000,000 tons of ore had been mined above the 400-ft. level, it is probable that Dr. Douglas believes that the ores now occupy approximately one-tenth of their original volume; the remaining nine-tenths being now " ledge matter," mainly ferruginous clay. Nothing could be clearer than the above description as an explanation of the cost factors. All the altered residual masses must be explored; this means that the mine development, in addition to the shafts and drifts necessary to reach the ore, must search through 10 cu. ft. of difficult mining ground for every cubic foot to be extracted. At various places in the mines large masses, like kernels, of original pyrites, still exist, surrounded on all sides by the " ledge matter." Although workable ore is found along the periphery of these masses, the pyrite itself is not payable. No concen- trating ore has yet been found in the district. All the ore raised from the mines must be smelted, consequently it must be selected as much as possible. To sum up there are in these mines three powerful factors that make for high costs: (1) A very large proportion of develop- ment work; (2) soft ground, requiring slow, cautious working and heavy timbering; (3) careful selection imposed by the neces- sity of smelting the whole product, thus imposing a high sub- sequent metallurgical cost. This is the most imperative factor 186 THE COST OF MINING of all, for it can be shown that in this case lower costs at the expense of having to smelt lower grade ores might result in fright- ful losses of profits. To mine 4 per cent, ore for $3 a ton against 7 per cent, ore at $6 a ton, smelting costs remaining the same, would increase the cost of copper about 0.82 cents a pound, or $16.40 a ton. The Copper Queen mine, .unfortunately, does not publish its reports, and the Calumet & Arizona, the only other impor- tant mine at Bisbee, does not give details. The figures from the Calumet & Arizona reports in an accompanying table throw some light on the subject: SUMMARY OF OPERATIONS OF CALUMET & ARIZONA FOR FIVE YEARS Year Copper Price Value Copper Gold and Silver Total Value Tons 1904 1905 31,638,660 31,772,896 12.562 14.923 3,974,448 4,741,484 $195,926 178,843 $4,170,374 4,920 327 205,807 202 952 1906 1907 37,470,284 30,689,448 17.96 18.103 6,729,612 5,554,781 238,464 210,846 6,968,076 5,765,627 215,671 232,460 1908 28,048,329 12.948 3,631,655 234,358 3,866,013 265,344 Total &Av. 159,619,617 24,631,978 $25,690,417 1,122,234 Year Devel. Ft. Div. * Excess of Assets No. of Men Mining Estimated Cost of Mining Per Ton 1904 1905 19,955 21,737 1,300,000 1,700,000 1,823,992 583 629 $6.15 6.68 1906 1907 1908 14,818 23,016 30,680 2,600,000 3,300,000 800,000 3,423,269 597 621 567 6.00 5.70 4.60 100,206 9,700,000 Copper equivalent Copper equivalent per ton Approximate earnings Approximate cost Cost per ton Cost per Ib. copper Tons per ft., development work . 166,500,000 Ib. 148 Ib. ... $10,900,000 . . . $14,790,000 $13.18 8.9 cents ..11 VARIOUS COPPER MINES OF ARIZONA AND MEXICO 187 The first report that gives actual operating figures to any extent is that for the year 1908. The comparison, with the five-year period is interesting. The amount smelted was 265,344 tons containing the equivalent of 113 Ib. per ton, against 148 for the five years. Per Ton Operating mines and smelters $2,089,158 $7.87 Current construction 195,408 .74 Salaries and general expense 32,011 .12 Refining and marketing 368,529 1.39 Ore purchases 22,964 .08 Total $2,708,070 $10.20 The cost per pound copper is 9 cents. There is nothing to indicate the comparative cost of mining and of smelting except the number of men employed in each. The total number at the mines averaged 567, and at the smelter, 484. It seems probable that the total cost of mining will equal $6 a day per man employed, this being estimated on the theory that the labor cost is 60 per cent, of the total, which would indi- cate a mining cost, including development and everything, of $4.60 a ton. This cost is good for Bisbee and I believe below the average at this mine. Smelting would cost, on this basis, $3.18 per ton, which seems very good. SUPERIOR AND PITTSBURGH This property is a consolidation of several others which undertook a bold and expensive exploration of a tract of 1388 acres lying in the trend of the assumed extension of the copper Queen orebodies. The venture has been successful as far as finding ore is concerned, but has not yet become profitable. It is heavily capitalized, the stock issued being 1,500,000 shares at $10 par value. That' the outcome is viewed with confidence by the stockholders, or by the public, is proved by the present market value (April, 1909) for the stock of $13 a share. Operations have been carried on since the consolidation at a loss of $1,031,284 in three years. The output and results have been as follows: 188 THE COST OF MINING 19 Dry Tons Smelted Feet Development Copper Gold and Silver Total Value 1906 1907 95,779 111,710 40,019 23,332 9,044,875 9,691,905 $21,941 33,401 $1,645,339 1,787,544 1908 214,847 29,572 21,924,259 121,296 2,839,000 422,336 92,923 40,660,539 176,638 $6,271,883 The equivalent of copper per ton is 100 Ib. The cost per ton averages $17.30, and the cost per pound copper 17.3 cents. Tons per foot development, 4J. A great improvement over these averages is shown by the report for 1908. The copper equivalent in the ore for that year is 108 Ib., nearly equal to Calumet & Arizona for the same year. Here is the record : Tons smelted dry Mining and smelting Current construction .... Salaries and general Refining and marketing 264,869 Interest 84,719 The cost per pound was 12.54 cents. Per Ton $11.60 .14 .17 1.23 .40 $2,908,031 $13.54 214,847 $2,490,857 30,938 36,648 PHELPS, DODGE AND COMPANY A prospectus issued in December, 1908, announcing the incorporation of the various properties owned by this concern, contains all the official information issued to the public about them, and is given in following pages verbatim, so far as it relates to the copper mines. The prospectus interrupts to some extent the policy of secrecy heretofore maintained concerning the mines, but it gives no operating details. It is not possible, therefore, to calculate the costs with assurance. It is only pos- sible to make some comments on the data furnished in order to apply to some extent the argument developed throughout this volume, as to the relation of capital charges to operating charges and profits. VARIOUS COPPER MINES OF ARIZONA AND MEXICO 189 STATEMENT BY COMPTROLLER COPPER QUEEN CONSOLIDATED MINING COMPANY "This property consists of one hundred and thirty-five (135) mining claims in the Warren mining district, Cochise County, near the town of Bisbee, Arizona, a large smelting plant at Doug- las, of a capacity of 3000 tons a day, which treats the product of the mines of the Copper Queen Company, and for the time being the ores of the Moctezuma Copper Company, and does general custom work. The company conducts a mercantile business, and has large stores and warehouses in Bisbee and Douglas, and a branch store in Waco, Arizona, as well as other pieces of real estate. It also owns mining interests in other localities. "For five years past the production of the mines has been as follows : 1903 37,257,470 Ib. 1904 50,151,552 Ib. 1905 64,625,955 Ib. 1906 79,219,655 Ib. 1907 63,341,055 Ib. Total 294,595,687 Ib. "The output of the Douglas Reduction Works, including pur- chased and custom ores, for five years past has been 363,121,911 Ibs. "The earnings of the company during the five years past have been as follows: 1903 $2,201,640.40 1904 2,960,659.70 1905 5,609,486.30 1906 7,625,854.76 1907 4,471,137.08 Total $22,868,778.24 "The difference between earnings and dividends is repre- sented by expenditure on increased plant facilities, and undis- tributed assets, consisting of the larger stock of coke and fuel necessitated by increased operations; and the accumulated stock of ores at the works, amounting in value to over $1,000,000, as well as by increased cash and increased reserves. 190 THE COST OF MINING "A large portion of the company's mining property has as yet been undeveloped, though situated within the recognized mineral zone of the district, and, owing to the difficulty of hold- ing up the soft, shifting ground in which the ore occurs, it has always been found impossible to block out ore reserves as large as mines of such capacity elsewhere have usually maintained, as nominally in sight. There is, however, at the present time as much ore in sight as at any other period of the mine's history. "The valuation of the company's property as of November 1, 1908, exclusive of the mines, is as follows : Invested in plant $4,974,866.77 Other assets 10,915,492.97 Liabilities 1,275,573.40 MOCTEZUMA COPPER COMPANY "This property consists of about 2500 acres of mineral ground in the State of Sonora, Mexico, on which has been opened the Pilares mine. This is in a mineralized body, oval in shape, and which retains approximately its dimensions between surface and the seven hundred foot level. It is about 1700 ft. in diam- eter from north to south, and 1200 ft. in diameter from east to west, and contains a large area of profitable ore. A narrow gage steam railroad five miles in length connects the mine through the Pilares Tunnel with the concentrating mill at the town of Nacozari. The tunnel itself, with its branches, is over a mile in length, and is large enough to allow of the railroad cars reach- ing through it the different sections of the mines, and receiving their charge from large bins excavated out of the ore. These bins are of a capacity of several thousand tons each, and are fed through chutes extending to the surface levels, the chutes also being excavated from the mineralized ground. 11 The quantity of what may be considered ore depends entirely upon the grade which it is profitable at a given price for copper to work, but the mine is at present opened up for an extrac- tion of 1500 to 2000 tons a day of ore of an average grade of three per cent. The daily capacity of the concentrating mill just completed at Nacozari is 2000 tons. At Nacozari is a well- designed power plant, equipped with Curtis turbines of over 4000 horse-power, for transmitting high voltage current to both the VARIOUS COPPER MINES OF ARIZONA AND MEXICO 191 mill and the mine. For the time being it is found to be more profitable to convey the concentrates and rich ores by the Naco- zari Railroad to Douglas, Arizona, seventy miles distant, than to smelt them on the spot, the ores being treated at Douglas at the same profit to the Copper Queen Company as though they were custom ores supplied by an unallied customer. This fea- ture of the company's operations explains the comparatively small quantity of supplies carried by the Moctezuma Copper Company as compared with the other companies. "The old concentrating mill, which is still intact, with its very efficient gas engine and gas-generating plant, which up to within a few months treated 600 tons of ore a day, is now out of com- mission, though it can be started at short notice as a supple- mental plant to the new mill, should this course be desirable. " The production for the five years past has been as follows : 1903 10,281,970 Ib. 1904 11,061,649 Ib. 1905 10,160,016 Ib. 1906 12,714,726 Ib. 1907 9,640,390 Ib. Total 53,858,751 Ib. "The increased capacity of both the mine and the concen- trating mill, owing to recent improvements, is indicated by the fact that in May, 1908, the production was 784,892 Ib. of metallic copper, whereas by the month of October it had reached 2,300,000 Ib. of copper, contained in 9500 tons of 12^ per cent, concen- trates. A production of approximately two million pounds of copper a month can now be maintained; and, if the market demanded it, this production could be increased to three million pounds per month. "The net earnings for the five years past, while the mine was still in a stage of development and the works were contracted, were as follows : 1903 . $456,524.55 1904 598,992.36 1905 533,117.66 1906 1,195,424.18 1907 833,236.25 Total $3,617,295.00 192 THE COST OF MINING "The company has built and owns the whole town of Nacozari, and has provided it with a well-furnished library and amusement hall, a thoroughly equipped hospital, hotel, boarding houses, and schools. At the Pilares mine the company has provided its workmen with comfortable houses and supports a school. At both Nacozari and Pilares the company has large stores and warehouses, and conducts a profitable mercantile business. 'The valuation of the company's property as of November 1, 1908, exclusive of the mines, is as follows: Invested in plant $3,046,384.32 Other assets 944,663.08 Liabilities 347,221.22 THE DETROIT COPPER MINING COMPANY OF ARIZONA "The mines of this company are situated in the Clifton dis- trict, Arizona, in the same beds of felspathic rock which at the present time are yielding the product of the Arizona Copper Company, the Shannon Copper Company, and certain less prom- inent organizations. The property owned by the company consists of one hundred and forty-five (145) mining claims, and the ore now extracted amounts to about 36,000 tons per month, yielding about three per cent, of copper. The bulk of the ore is concentrated mechanically to a grade of about fifteen per cent., and smelted at Morenci in the company's own smelting works. "The company's production for the five years past has been as follows : 1903 16,869,300 Ib. 1904 16,424,394 Ib. 1905 14,632,117 Ib. 1906 20,347,497 Ib. 1907 . . 17,974,581 Ib. Total 86,247,889 Ib. "The production for the eleven months of the present year has increased to 21,500,000, owing in great measure to improved facilities for treatment. The future production with the present equipment can be maintained at approximately two million pounds of copper per month. "The earnings during the past five years have been as follows: > VARIOUS COPPER MINES OF ARIZONA AND MEXICO 193 1903 . $543,456.00 1904 1905 1906 1907 603,340.00 532,634.28 973,456.42 814,874.11 Total $3,467,810.81 " The company runs a large store and hotel, and owns consid- erable other property in the town of Morenci, besides a powerful pumping plant on the San Francisco River seven miles distant. " The valuation of the company's property as of November 1, 1908, exclusive of the mines, is as follows: Invested in plant . . Other assets Liabilities . $2,158,106.00 2,934,465.97 149,878.48 " The ores from the Copper Queen mines carry about twice the quantity of copper contained in those of the Nacozari and Morenci districts, but this advantage is offset by the higher cost of mining the Queen ore, owing to the character of the de- posits in which they occur. Moreover, as the Queen ores cannot be subjected to preliminary mechanical concentration, which raises the smelting grade of the Nacozari and Morenci ores, they must be subjected to furnace treatment as they come from the mines; hence the cost of smelting a ton of Queen ore is higher than the cost calculated on a ton of crude Nacozari or Morenci ore, as it comes from the mine previous to mechanical concen- tration. " Referring to the Copper Queen and confining attention to the output from the company's own mines we get the following: Year Output Pounds Operating Profits Dollars Profits per Pound Cents Average Price Cents Cost Cents 1903 37,257,470 2,201,640 5.9 12.6 6.7 1904 50,151,552 2,960,659 5.9 12.562 6.962 1905 64,625,955 5,609,486 8.7 14.923 6.223 1906 79,219.655 7,625,854 9.63 17.96 8.33 1907 63,341,055 4,471,137 7. 18.103 11.103 Five years 294,595,687 22,868,778 7.76 15.7 8 194 THE COST OF MINING The amount invested in plant is given at $4,974,866. Since it is stated above with reference to the Bisbee district, by Dr. Douglas that the ores of the Copper Queen average about 140 Ib. copper per ton, an approximation that is borne out by the record of the neighboring Calumet & Arizona mine, it does not seem rash to say that the mining plant is equal to a capacity of 600,000 tons a year, and the smelting plant to 900,000 tons a year. Aver- aging the two we might say the plant is such that an output of at least 750,000 tons a year can be taken care of. The cost of mining and smelting plants may, therefore, be approximated at $7 per ton of annual capacity. Taking into consideration the character of the orebodies exhibited by the remarks in the pro- spectus, it seems fair to calculate the amortization of plant in a period not exceeding fifteen years from the beginning of the term in question. This requires an annual instalment of 10 per cent. To this should be added depreciation at 6 per cent, to cover the current construction. Applying these figures, not the whole period, but to the maximum capacity reached at the end, we get For amortization $0.70 per ton For depreciation 42 per ton Total $1.12 per ton Dividing this by 140 Ib., the average amount of copper realized per ton, we get 0.8 cents per pound as the amount that should be added to operating charges for plant account. I am disposed to regard this as a minimum figure and prefer to believe that at least 1 cent per pound should be added for these charges. This would mean only $2,940,000 in five years for the use of cap- ital already invested and for current construction. It is to be presumed that the company made some profit on treating cus- tom ores, but as these ores must have come largely from other mines owned by the same group, it is not likely that such profits would be sufficient to alter the calculation materially. My estimate of costs, then, for the Copper Queen is as follows: VARIOUS COPPER MINES OF ARIZONA AND MEXICO 195 Operating Costs Cents Capital Costs Cents Total Cents 1903 1904 6.7 6.96 1 1 7.7 796 1905 6.22 1 722 1906 8.33 1 9.33 1907 Average 11.1 8 1 1 12.1 9 It will be noted that the average is exceedingly close to that figured for Calumet & Arizona; and, further, that a consider- able rise was incident to the boom period of 1906-07. MOCTEZUMA COPPER COMPANY The figures on this property are very interesting in view of the light they throw on the probable results to be obtained from the Miami, Ray, and other new properties of approximately the same grade and type. Year Output Pounds Operating Profits Profits per Pound Average Price Operating Cost 1903 10,281,970 456,524 4.44 12 6 8 16 1904 11,061,641 598,992 5.44 12 562 7 178 1905 10,160,016 533 117 5 25 14 923 9 773 1906 12,714,726 1,195,424 9.4 1796 8 56 1907 9,640,390 833,236 9.64 18.1 9.46 Five years 53,858,751 3,617,295 6.7 15 3 8 6 In this case the plant investment is $3,046,384, and the pro- ducing capacity is now easily 24,000,000 Ib. a year. Calcula- ting depreciation at 6 per cent, we get an annual charge of $182,800 a year, equal to 0.76 cents per pound. Add this to 8.6 and we have 9.36 cents as the dividend cost. It is very prob- able that with the increased tonnage now possible, the cost will average not over 9 cents. On a life of twenty years, the plant may be amortized at 8 per cent., equal to about 1 cent per pound. The selling cost may then be put at between 10 and 10J cents, a figure that fully bears out the conclusions arrived at from other sources. 1 1 See Chapter XIII. for discussion of the cost of producing copper from ores of approximately this grade and type. 196 THE COST OF MINING DETROIT COPPER COMPANY Neglecting the explanation of details, it appears that this company earned $3,467,810 from 86,247,889 Ib. copper, equal to 4 cents a pound. The cost must have been about 11.3 cents. The capital invested is only $2,158,106, on which depreciation at 6 per cent, gives an additional cost of 0.7 cents per pound. The dividend cost may be calculated at 12 cents. In all of the above calculations I have failed to exhibit the copper equivalent for gold and silver contained, because the amounts are not given. In most of these mines, however, the value of precious metals is only 2 to 3 per cent, of the total, so that the figures given cannot be far astray from this cause. GREENE CONSOLIDATED, CANANEA, MEXICO This company has a very large property near the Arizona border in the state of Sonora, Mexico. In 1906 the Greene Cananea Company was formed to consolidate the old Greene Consolidated Copper Company, and the Cananea Central Copper Company. The management has been completely reorganized. The record of the old Greene Consolidated Company was as follows : Output and Dividends GREENE C( )NSOLIDATED Lb. Copper Dividends 1901 28 826 854 $400 000 1902 38,268,407 1903 42,310,544 600000 1904 55 014 339 1 200 000 1905 63,005,848 2 800 000 1906 55 943 739 1 200 000 283,369,731 $6,200,000 The dividends are up till March, 1907. It appears that up to that date the dividends, which must represent approximately the earnings, were equal to 2.19 cents per pound copper produced. If we count as copper the value of silver and gold produced, the earnings per pound would be VARIOUS COPPER MINES OF ARIZONA AND MEXICO 197 about 2 cents. Since in those particular years the average price of copper was about 14.9 cents, we may conclude the average cost to have been about 12.7 cents; and since at the end of the period it was found necessary to undertake large improvements, it is altogether probable that something should be added for depreciation. No estimate of the amount of ore in sight is given in the report for 1908. The report goes into the question of mining costs so thor- oughly and with so much good sense and poise that I quote largely from the statements of the general manager, Mr. L. D. Ricketts. It will be seen that the reduction of costs in all departments has been enormous. But it occurs to me to point out one or two reasons for accepting with a little caution the conclusion that the process of reduction is so firmly intrenched that further reductions are inevitable. First let me note that during 1908 the monthly tonnage treated was about 60,000 against nearly 100,000 in former periods. It is just possible that the reduced tonnage may have great advantages over the full tonnage in that it is secured with selected labor and from selected places. Either of these advantages may be of great consequence in the matter of costs, as has been pointed out in the chapter on the Value of Mining Property. It comes as an example of how costs go down in periods of depression. Second, it is worth considering whether the period under review does not get great advantages from the reconstruction that preceded it. All plants were overhauled and renovated. It is natural to suppose that in consequence everything was in excellent repair better than average. As to charging up cur- rent construction to operating, that is something that always must be done sometime whether the cost sheets show it or not. There is no great virtue in doing it in this particular case because in this very year, outside of what was charged to opera- ting, there was spent on plant no less than $820,000 or 5^ cents per pound of copper produced from the company's own mines. Furthermore, let us consider the following: At average prices for the last ten years (15.4 cents copper, 57 cents silver, and $20 gold) the ore for 1908 shows the following values: 198 THE COST OF MINING Copper 53.4 Ibs. = $8.22 Silver 0.923 oz. = .54 Gold . 0.00575 oz. = 0.115 Total 8.87 = 57.6 Ib. copper. The costs for 1908, the lowest on record, are $5.976 per ton. This gives 10.37 cents per pound for the copper, or its equivalent, extracted. With these costs, the profit per pound is 5 cents and we might expect a profit, under average conditions, of some $2.80 per ton mined and treated. With these comments the following is quoted directly from the report. " THE CANANEA CONSOLIDATED COPPER COMPANY, S.A. AUDITOR'S REPORT December 31, 1908 Earnings Total earnings on copper, gold and silver, and net earnings from miscellaneous revenues $2,427,335.79 Expenditures Total expenditures account copper, gold, and silver 1,821,029.85 Net profit for year $606,305.94 Sundry expenditures, including shut-down costs, etc 820,446.56 Deficit for the year 1908 $214,140.62 REPORT OF GENERAL MANAGER The figures of production are for the period beginning July 11, 1908, when operations were resumed, to the close of the calendar year. In reading this report I would respectfully refer you to my report of February 15, 1908. Tonnages Wet tons domestic ore treated 295,554 Wet tons custom ore treated 72,088 Total 367,642 Ratio of concentration, domestic ore milled 3.12 tons into 1 Ratio of concentration, custom ore milled 4.02 tons into 1 VARIOUS COPPER MINES OF ARIZONA AND MEXICO 199 Production Returnable fine copper in domestic bullion 15,679,685 Ib. Returnable fine copper in bullion from custom ore 2,939,924 Ib. Total 18,619,609 Ib. Silver in domestic bullion 272,651.24 oz. Silver in bullion from custom ore 175,011.99 oz. Total silver 447,663.23 oz. Gold in domestic bullion 1,700.683 oz. Gold in bullion from custom ore 1,178.150 oz. Total gold 2,878.833 oz. RECOVERY FROM ORES Recovery from domestic ore and other material treated was as follows : Copper 2.652 per cent. Silver 0.923 oz. Gold 0.00575 oz. The value of the precious metals per ton of domestic copper produced amounted to $21.09. Development during period: January 1 to December 31-, 1908: Shafts 412.5 ft. Winzes and raises 3,550.5 ft. Tunnels, drifts, and crosscuts 9,388.0 ft. Total 13,351.0 ft. THE MINES The following statement covers the tonnages and costs of mining at the various mines: * Wet Tons Total Cost Cost per Wet Ton Puertocitos . . 18,465.4 $41 549 68 $2 250 Elisa 40 481 4 71 580 00 1 764 Capote Oversight . . . 15,923.1 142,824.8 82,088.64 272 766 63 5.155 1 910 Veta Grande 91,901 3 191 992 54 2 089 Total 309 696 659 997 49 2 131 THE COST OF MINING " The cost of mining for the total tonnage mined was $2.13 per wet ton. For the fifteen months ending October 31, 1907, it 200 THE COST OF MINING was $3.28, and for the year 1905-1906 it was $3.85. Great credit belongs to the Mining Department for this showing under most difficult conditions. The reasons for the decreased costs are twofold. First, the slicing and caving system has been thor- oughly learned and applied to the various mines in the modified forms which the conditions demand. This has resulted in a decreased amount of timber and supplies and an increased effi- ciency of the men. The second reason is that the Mining Depart- ment has been entirely reorganized and the average pay per employee has been decreased by this readjustment very nearly 20 per cent. We have, therefore, a decreased cost per man and an increased output per man. For the period in question the output per man has been increased from 1.2 to 1.6 tons, and this covers not only the miners but the muckers, trammers, blacksmiths, and in fact every employee of the mines up to and including the foremen. It is hard to realize the difficulties that have been encountered in accomplishing this, but it had to be done and was done. " Departing from facts and predicting for the future, I have little doubt that we will be able to maintain and improve upon these costs in spite of the tremendously increased amount of development work we propose to do, and we can look to continued decreases in mining costs rather than increases for some time to come; but in saying this I am keeping in mind certain capital expenditures which are exceedingly urgent. This construction provides cheaper compressed air and more electrical power at the mines. You have authorized and we are now installing an air compressor of 6000 cu. ft. of free air per minute capacity at the power house and will lay a pipe line to four of the mines and replace with this one machine eight uneconomical small machines. Since the reverberatory furnace is generating an average of over 600 boiler horse-power we have a surplus of boilers at the power house and no new boilers are needed, and our power house con- denser is abundantly large to take care of this compressor. In addition to this we are now up to the limit of our electrical gen- erating capacity and it is essential that we should put in more power for the use of the mines. Mr. John Langton, consulting engineer, is now making a study and report on our power equip- ment, and is preparing specifications to be submitted to you. It would appear that with an expenditure of $57,000 we can VARIOUS COPPER MINES OF ARIZONA AND MEXICO 201 increase our capacity 1000 kilowatts and reduce the cost of generating power per kilowatt year about 15 per cent. If this unit is put in there is no question but that other capital expen- ditures will be required, because if we can change over our steam hoists of four of our shafts to electrically driven hoists by the addition of the proper motors we can abandon entirely four very expensive steam plants. If the program is approved and car- ried out it will require a total expenditure of about $120,000. In making this recommendation I have carefully considered the tremendous expenditures that we have had to make and am still keeping in mind the rule of recommending only expenditures that will pay for themselves in one year's operations." THE CONCENTRATORS " The Cananea ore is probably the most difficult to concen- trate of any copper ore in the country on account of the tre- mendous amount of clay, which is not only not susceptible to dressing, but which prevents proper settling of the fine sands. Our losses on this account are high and there are certain losses that we have proved by experiment we can recover by collect- ing the fine sands from the large settling tanks below the mill and reconcentrating them. We are now installing a vanner house about 300 ft. in length on the opposite side of the canyon, and will rehandle the fine sands from the tailings over the 40 vanners and 10 card tables that are being installed therein. In conjunction with this vanner house Mr. Cole has installed settling tanks of approved plan, and it includes, of course, appliances for conveying the concentrates to the railroad storage bins. Later on we propose to double the capacity of this plant. The preliminary installation will cost $50,000 and the additional 50 vanners will cost about $30,000 more. " In all of these improvements we have followed the plan of undertaking no construction that will not pay for itself within a year. " The cost of concentration of the domestic ores was $0.94 per ton on account of the immense amount of construction charged to operations, but the result will be not only an increased saving, which is badly needed, our present saving being only about 70 per cent., but we can safely see a reduction in cost to 75 cents per ton or under. The same care was taken in reorganization in 202 THE COST OF MINING starting up the concentrator with what undoubtedly is very beneficial results. THE REDUCTION DIVISION 11 The average daily pay-roll at the smelter, including the power house, was formerly $1,823.57, and during the past six months it has been $763.57. The efficiency of blast in convert- ing has been raised from 43 per cent, to 61 per cent., and the efficiency of blast on the furnaces has been raised a corresponding amount. " The reverberatory ran 150 furnace days. It treated 30,275 tons of net dry charge at a cost of $1.83 per ton, allowing a credit of 60 cents per ton for steam generated in the reverberatory boilers. This average is high because the first few months' run was very much more costly than later on, and we have recently been smelting for about $1.37 per ton, allowing credit for steam generated. The cost of power has been reduced about 40 per cent. " I give below a table compiled from Mr. Shelby's report, show-, ing comparative results for the six months prior to and the six months subsequent to the shut-down, covering the total Reduc- tion Division costs per ton of ore and old secondaries treated, per ton of new material treated, and per ton of fine copper pro- duced. " REDUCTION DIVISION COST COMPARISONS Last six months' operations for 1907 and 1908: BASIS PER DRY TON TONS TREATED OR PRODUCED Ores and Concentrates New Material Fine Copper 1907 1908 1907 1908 1907 1908 Total costs . . . 220,446 $6.82 164,361 $3.86 299,620 $5.02 217,177 $2.93 11,103.288 $135.47 9,295.769 $68.47 VARIOUS COPPER MINES OF ARIZONA AND MEXICO 203 MINING AND BENEFICIATING " Copper costs for six months of operation were Gross costs, F. O. B. Cananea Freight to New York, export tax, refining, market- ing, interest, etc Total cost Credit for value of precious metals $0.0105446 Miscellaneous revenues at Cananea 0.0075206 Total cost of fine copper sold Construction not charged to operation Cost including every expenditure as follows: $0.0992751 0.0168642 $0.1161393 0.0180652 $0.0980741 $0.0070583 $0.1051324 " The yield of copper per ton of ore beneficiated given at the beginning of this report is misleading in that during July we smelted a considerable tonnage of cleanings found in tearing out old ore bins and other structures. The actual net yield of the ore beneficiated was 51.25 Ib. per ton as against 46.58 Ib. for the fifteen months ending October 31, 1907. Owing to the de- creased cost of smelting we have been able to send leaner ores of the Puertocitos and Elisa class to the smelter with a handsome margin of profit, and we have been able to smelt leaner ores that formerly went to the concentrator. This has resulted in increasing by nearly 50 per cent, the percentage of direct smelting ore to the total ore mined and has caused an increased yield per ton. As a matter of fact, therefore, the average gross copper contents of the ore have not increased even as much as the figures above would indicate. On the other hand, the greater percent- age of ore smelted direct has tended to increase the total cost of mining and beneficiating a ton of ore, but with this increase the cost is more than paid for by the increased saving of values. " The following is the total cost of mining and beneficiating a ton of ore, including every cost until the refined products are sold : Period Cost per Ton Tons Beneficiated Fiscal Year 1905-1906 $10.21 947 977 August 1 1906 to October 31 1907 7 625 1 305 291 July 11 to December 31 1908 5976 295 554 204 THE COST OF MINING " The results show a decreased cost during the six months of 1908 of $1.649 per ton over the previous period, and a decrease of $4.234 over the fiscal year 1905-06. In other words, had we been able to mine and beneficiate the ore for the fifteen months ending October 31, 1907, under present conditions the cost would have been decreased by about $2,150,000 plus the value of the increased saving. " In making a careful and balanced study of the cost of mining and beneficiating ore two years ago the vital features were ob- vious. It was necessary to get cheaper mining costs, cheaper smelting costs, cheaper fuel, cheaper power and cheaper trans- portation. While we have made notable advance on the first four items we have been unable to obtain any adequate conces- sions in the matter of the heavy freight rates on fuel and sup- plies. We are virtually in the same location as our neighbors across the line when the great distance from the source of fuel, coke, and supplies is considered, yet we are charged rates that in the aggregate amount to one cent per pound of copper in excess of the rates paid by our neighbors, and the burden is hard to carry. The question is serious, yet we think fair freight rates would mean increased tonnages that give the highest profit to all concerned. " While predictions are dangerous, and I have in this report only given figures from results actually accomplished, I have no hesitation in saying that we shall be able to continue decreasing the cost of mining and beneficiation and increasing the per- centage of saving to a notable degree, although we cannot expect to make reductions corresponding to those made during the past year/' CHAPTER XII COPPER MINES IN VARIOUS OTHER DISTRICTS Tennessee Copper Company Utah Consolidated Mount Lyell in Tas- mania Granby Consolidated in British Columbia Utah Copper Company Northern California First National Copper Company. TENNESSEE COPPER COMPANY ONLY one mine of importance is found in the United States east of Lake Superior. It is owned by the Tennessee Copper Company, which works several large lenses of cupriferous pyrite. All the ore must be smelted in the blast furnace. For ores of this character I believe this company does the cheapest work in the world. Its reports are excellent and reveal not only the operating costs in detail, but also the plant expenditure and the ore in sight. The external factors are favorable. Fuel is cheap and trans- portation to markets much less than for western mines. Wages are about 20 cents an hour, but I do not believe this means cheap labor. The internal factors are favorable, with the exception of the necessity of smelting all the ore. This is a most powerful ele- ment of high cost. The ore yields only 32J Ib. copper to the ton. The current operating costs for 1907 were as follows: Mining ........................................... $1.22 Smelting ......................................... 2.14 Administration etc .................................. 0.49 Total To this I think should be added 21 cents a ton for the use of the mining plant and 47 cents a ton for the use of the railroad and the smelting plant, making a total of $4.53. In detail these costs are as follows: 205 206 THE COST OF MINING COPPER MINES IN VARIOUS OTHER DISTRICTS 207 Development $0.1318 Mining, hoisting, etc 0.9389 Crushing and sorting 0.0804 General.. 0.0851 Total current cost $1.2162 Add cost of preliminary development amortized in 15 years at 5 per cent, interest and 5 per cent, annual amor- tization 0.06 Mining plant similarly amortized 0.15 Transportation to smelter $0.1329 Blast furnace 1.6279 Engineering and laboratory 0.0628 General 0.0852 Converting 0.2402 Total current smelting cost $2.1430 Add amortization of smelting plant and railway as above 0.47 Add administration, shipping, refining and selling expenses 0.49 Grand total $4.5292 On the basis thus figured, anything received above 12 cents a pound for copper in New York is applicable to dividends, and anything above 14 cents is net profit after allowing for the return with interest of money invested in the plant. These costs are higher than the average by from 5 to 10 per cent. The costs for 1907 were high on account of unfavorable economic condi- tions throughout the country. It should be explained further that in addition to the copper the sulphur is being utilized so that in future the property will not be wholly a copper mine. Its operations will be nearly equivalent to those of the Rio Tinto Company in Spain. UTAH CONSOLIDATED This company has mined since 1899 large deposits of cu- priferous pyrite at Bingham, Utah, averaging by actual recovery for five years 60 Ib. copper, 1.33 oz. silver, and 0.104 oz. gold per ton. The silver and gold are worth about $2.88 per ton, so that with copper at 14 cents per pound there is a total metallic extraction equivalent to 80 Ib. copper. The ore occurs in large lenses or shoots in limestone. It is approximately self-fluxing, there being a moderate excess of iron over silica. Most of the mining has been done through adit levels. The mining plant is not extensive. The ore is delivered to the railroad over an aerial 208 THE COST OF MINING tramway about 12,000 ft. long. It is transported by rail about 25 miles to the smelter. The external conditions are, for the Rocky Mountain region, good, and the internal factors, with the single exception of the requirement of smelting all the ore, very favorable for cheap work. The ore is soft, uniform, and occurs in good-sized bodies. The stoping is done in square-set rooms. The item of timber- ing must be one of the chief mining expenses. There is nothing in the reports to show the mining or smelting losses; but with this exception the reports are excellent. They give the stockholders in brief but sufficient outline the costs and financial results of the business. In the five years ending December 31, 1907, the costs were as follows : COSTS PER TON FOR F[VE YEARS, UTAH CONSOLIDATED Per Ton Mining, 1,260,453 tons $1.73 Development, 1.400,000 tons 0.30 Transportation, smelting, and refining, 1,276,393 tons 2.80 General expense, 1,276,393 tons 0.23 Current construction, 1,276,393 tons 0.34 Amortization at 5 per cent, interest and 5 per cent, annual amorti- zation of $1,232,274 invested in plant at beginning of period ; this being sufficient to retire the investment in 15 years -- proportion for five years 0.4S Total cost $5.88 Recollecting that the ore contains in copper, gold, and sil- ver the equivalent of 80 Ib. copper to the ton, we get an average complete cost of producing copper of 7.35 cents per pound. This may be divided as follows: actual operating cost, 6.75 cents; allowance for return of working plant, 0.60 cents. Of course, everything received above 6.75 cents for copper or its equivalent in New York goes to the stockholders as dividends. The report of the Utah Consoldiated for the year 1908 exhibits conditions that are not comparable with certainty to those of former years. The smelter, which was the principal plant asset of the company, had to be permanently shut down on account of a decision of the court to the effect that its operation was in- imical to the agricultural interests of the Salt Lake valley. In 1908 the ore was treated at the Garfield smelter of the American Smelters Securities Company, under terms that the Utah Con- COPPER MINES IN VARIOUS OTHER DISTRICTS 209 solidated believes to be unfavorable. Certain deductions were made from the metal contents of the ores under this contract. The exact amounts deducted are not stated. On the face of the returns the record for the year were dis- appointing. The costs were as follows: Per Ton Mining 248,215 tons $ 461,711 $1.86 Ex. and development 73,441 .30 Mine plant 3,869 .01 Smelting and transportation 921,239 3.71 Depreciation and general 127,569 .52 Current construction 129,621 .52 Add refining and marketing, bullion actually produced. 120,400 .48 Total operating $1,837,850 $7.40 Copper metal, Ib 10,648,243 Silver, oz 265,284 Gold, oz 23,441 At the prices current during the year this equals 15,225,000 Ib. refined copper. This is 61.4 Ib. per ton. Dividing the operating cost of $7.40 per ton by this amount we get 12 cents as the cost of copper per pound. The ore reserves have been increased so that there is no rea- son to change the amortization charge of 48 cents a ton given above. This, on account of the diminished yield of the ore is now equal to about 0.8 cents per pound. Adding this we get 12.8 cents as the selling cost of copper for the year. Needless to remark that this showing is disastrous and un- doubtedly the stockholders will await with impatience the inau- guration of new smelter arrangements, which, it is announced, will be provided by the new International Smelting Company. MOUNT LYELL The Mount Lyell Company operates a cupriferous pyrite mine and a smelter in western Tasmania. The original Mount Lyell deposit was a great mass of nearly pure iron pyrite con- taining only 0.6 per cent, copper, but a portion of it had been enriched near the surface. This deposit has been mined almost wholly from an open pit. Another mine, however, called the North Mount Lyell, produces a much more siliceous ore averaging 210 THE COST OF MINING 6 per cent, copper. This ore has to be mined underground. Dur- ing the last four years, which will presently be reviewed, about 60 per cent, of the ore has come from the Mount Lyell proper and 40 per. cent, from the North Mount Lyell. The external factors are probably nearly average for English- speaking countries. The climate is rainy, but not more so than Cornwall or Scotland. The mine is situated near the coast, so that supplies must be reasonable in cost, and transportation of copper, even to England, must cost less than transportation of western American copper to New York. The internal factors are, for a smelting enterprise, very favor- able. The ores are mined, thanks to the large proportion ob- tained from the open pit, for less than $2 a ton. The smelting is largely pyritic and the proportion of coke used in the charge is said to be only one per cent. In four years 1,690,531 tons were mined. In the same period the ore reserves diminished from 4,666,000 to 4,107,000 tons, a loss of 559,000 tons. At this rate of loss the property would last thirty years, but since (1) a large part of the low-grade pyrite which hitherto has been mined from open pits must be taken at greater cost from underground and, (2) there does not seem to be a first-class reason to believe that the rich ores of North Mount Lyell can be found in the same abundance for a long period, it seems safer to estimate a life of twenty years as the amortizing period of the investment. On this basis we may compute the costs as follows : COSTS PER TON AT MOUNT LYELL Mining 1,690,531 tons $1.05 Stripping 1,690,531 tons 0.26 Developing 1,131,258 tons 0.50 Total mining , $1.81 Smelting 1,698,793 tons $1 78 Converting 1,698,793 tons 0.34 Railway expenses 0.27 Freight and marketing 0.72 Total for smelting, refining, and marketing ^ $3.11 General expense 1,698,795 tons $0.25 Use of plant; being 5 per cent, interest and 3 per cent, amorti- zation for four years on average amount invested (376,000) 0.35 0.60 Total cost . $5.52 COPPER MINES IN VARIOUS OTHER DISTRICTS 211 The actual returns of metal from the Mount Lyell ores have been 34,210 long tons copper, 3,056,231 oz. silver, and 91,815 oz. gold. The extraction has been 86 per cent, copper, 99 per cent, silver, and 105 per cent, of the gold estimated by assay to be contained in the ore. There is no statement as to whether the ore treated is given in long tons or short tons, but it is probably safe to assume that the copper output is given in long tons. We have on this basis a recovery of 45.5 Ib. copper, 1.8 oz. silver, and 0.054 oz. gold per ton of ore treated. The gold and silver are worth $2.18 per ton, at average prices. This is the equiva- lent of 15J Ib. copper, and we may figure the metallic contents altogether as equal to 61 Ib. copper. On this basis the cost per pound of copper is 9 cents. GRANBY CONSOLIDATED The Granby Consolidated Mining, Smelting and Power Com- pany, Limited, British Columbia, has mined in three years 1,995,948 tons and treated 2,088,381 tons. The ore yielded by actual extraction 24.2 Ib. copper, 0.38 oz. silver, and 0.06 oz. gold per ton. The silver and gold are worth $1.42 per ton, equal to about 10 Ib. copper. The total value, therefore, is equiva- lent to a little more than 34 Ib. copper, and this may be taken as a safe basis for figuring the economic performance of the mine. The ore is chalcopyrite disseminated through porphyry altered by magnetic waters so as to form an approximately self-fluxing gangue. The ore will not concentrate, but is smelted in bulk. A large part of the mining has been done in open pits with steam shovels. This company does not issue a good report to its stockholders. The statement is too brief; it contains no estimate of ore devel- oped, nor does it give any intimation of the probable life of the mine. The reports give no figures about the capital, invested in lands as distinguished from capital in equipment. On these accounts it is possible that the costs indicated may not do the property justice. COSTS PER TON AT GRANBY Per Ton Current operating cost ; mining, smelting, refining, and marketing for 2,088,381 tons treated $3.39 Current construction 2,088,381 tons treated 0.36 Carried forward . $3.75 212 THE COST OF MINING Per Ton Brought forward $3.75 Return of $14,000,000 invested in lands and equipment at 5 per cent, interest and 5 per cent, annual amortization ; this being sufficient to extinguish the investment in 15 years with an output of 11,200,000 tons 2.00 Total $5.75 On this basis the selling cost of copper or its equivalent in New York is about 17 cents a pound. It is stated in the reports that a maximum capacity of 3500 tons a days, say 1,200,000 tons a year, has been provided. If this volume of operations can be maintained for fifteen years the amortization charges on the invested capital may be com- puted at about $1.16 per ton on 18,000,000 tons. This will equal 3J cents per pound copper and the total cost required to neutralize the investment is 14^ cents per pound. The idea can be expressed somewhat differently, as follows: Cost of copper for current operation and construction per Ib .. . 11 cents Profit per ton required to return capital in 15 years with 5 per cent. interest 3.5 cents Total cost required at maximum output for 15 years to make the investment justifiable 14.5 cents It is pertinent to remark that this is what I mean in all cases by amortization; but in other illustrations I have attempted to amortize only the capital invested in actual plant, while in the case of the Granby the amortization covers the entire investment in lands and property besides plant. UTAH COPPER The actual production for eighteen months ending Decem- ber 31, 1908, was as follows, the figures being the net return free from all smelter deductions : Pounds Copper Copper metal 54,051,212 Gold, 20,072 oz. equal to 3,000,000 Silver, 163,953 oz. equal to 665,000 Total metallic output expressed in copper 57,716,212 Using the round number of 57,700,000 Ib. as a divisor, we may calculate the cost as follows: COPPER MINES IN VARIOUS OTHER DISTRICTS 213 Dollars Approximate Per Ton Milled Per Ib. copper Operation (mine and mill) $2 666 284 $1 20 4 448 cents Mine development 20028 01 035 Prepaid stripping 121,103 .06 .210 Freight on ore 658 754 32 1.142 Treatment and refining 1,806,659 .85 3.131 Taxes, etc 7,588 0.012 Total operating Add depreciation, 6 per cent, of plant cost $5,280,416 387 000 2.47 12 9.134 0670 Total cost $5 667 416 2 59 9804 The cost does not correspond to that reported by the com- pany because, instead of deducting the gold and silver from the cost of copper, as the company does, I adopt the more logical method of calculating an equivalent for the gold and silver in copper metal and charging against the sum thus obtained the total costs. The addition of depreciation is absolutely essen- tial. It is a matter of experience in such plants that about 6 per cent, must be allowed for renewals and changes that usually have the appearance of new construction. Furthermore, in a theoretical calculation of complete costs we must add the amortization of the plant. In this case there is a guaranteed life of twenty-five years. This means that the capital will be retired with 5 per cent, interest by an annual instalment of 7 per cent. Now the total capital required for this business, outside of the cost of the land (which was prob- ably nominal), averaged almost exactly $5,741,000 on which the instalments for eighteen months would equal $592,805, equal to a trifle over 1 cent a pound. Add this to the 9.8 cents obtained above and we get 10.8 cents as the actual cost of copper to date. Looking to the future it is not necessary to include the amor- tization in the calculation of dividends. It is, however, a vital necessity in calculating the cost at which the mine can sell copper, for if the owners were to sell copper, to take this exam- ple, at say 10^ cents, because they calculate an operating cost of 9.8 cents, they would be in a fool's paradise. They would be losing part of their capital; burdening themselves with the 214 THE COST OF MINING conduct of a vast business for less real return than they could get for their money by buying gilt-edged bonds and doing nothing. But we must remember that the period we have reviewed is the first eighteen months of the mine's history. It is entirely likely that the mine will be worked out with an annual produc- tion averaging 75,000,000 Ib. The managers believe that oper- ating costs will be under 8 cents, which will change to 8.5 on the basis I have used. Let us agree to that and add an annual depreciation charge of $300,000. Let us say further that the capital employed will rise to a net total of $8,000,000. We shall have then the following costs: Operating 8.5 cents Depreciation 4 cents Amortization 8 cents Total cost 9.7 cents This means that 8.9 cents is the dividend cost and 9.7 cents is the metal selling cost. Owing to the great prospective importance of the type of mine that it represents, and also because it is an example of a good report to stockholders, I have thought best to reproduce here almost the whole report of the Utah Copper Company for the period of eighteen months ending with the year 1908. This report shows better than any other statement I have seen, mat- ters that occupy the attention of the management, the equip- ment, and plants required, and the conduct, in general, of such an enterprise. The problem involved is to take a disseminated ore containing 2 per cent, copper in the form of chalcocite from a very large deposit, concentrate it with a saving of 70 1 per cent, into one ton for every twenty-two tons mined, the concentrate running over 30 per cent, in copper. The company does not smelt its own ores, but has it done by contract by the Garfield plant of the American Smelter Securities Company. The following report is by the general manager, Mr. D. C. Jackling : 1 These figures are not being realized. The actual yield of refined copper does not seem to be over 20 Ibs. per ton. This fact may invalidate my conclu- sions as to the cost of copper from this type of deposit. See Chapter XIII. COPPER MINES IN VARIOUS OTHER DISTRICTS 215 "UTAH COPPER COMPANY December 31, 1908 Income Account 54,051,212 Ib. copper at .1336 cents $7,222,406.85 Debit difference in copper settlement for the period, .0016 87,639.06 Net price applying for the year's sales, .1320 . . $7,134,767.79 20,072.18 oz. gold at $20.00 per oz 401,443.60 163,952.87 oz. silver at 54.76 cents 89,780.33 Shipments of ore other than concentrating . . . 37,877.38 Rents received 9,300.90 Interest, freight, refunds, sale of power, etc. . 9,399.36 $7,682,569.36 Operation $2,666,284.44 Mine development 20,027.80 Prepaid expense 'Ore stripping 121,103.20 Freight on ore 658,754.14 Treatment and refining 1,806,658.52 State of New Jersey, Annual License Tax .... 4,005.90 Extraordinary tailings expense, Bingham Canyon 3,581.98 $5,280,415.98 Net profits for period $2,402,153.38 Interest on bonds $40,755.00 Dividends paid 696,387.50 737,142.50 Net surplus for 18 months ended Decem- ber 31, 1908 $1,665,010.88 "UTAH COPPER COMPANY RECEIPTS AND DISBURSEMENTS July 1, 1907, to December 31, 1908 Receipts Balance on hand July 1, 1907 $35,802.68 ! ( Issuance of 214,150 shares at $10.00 per share 2,141,500.00 ( Premium on sale of 214,150 shares at $10.00 per share . . . 2,141,500.00 Received from sale of bonds 1,500,000.00 Accounts payable 308,452.40 United Metals Selling Co 991,899.06 Net surplus for period 1,665,010.88 $8,784,165.02 1 These items cover conversion of $4,283,000.00 par value bonds converted into stock at $20.00 per share. 216 THE COST OF MINING Disbursements Additions to property acquired $99,972.41 Cost of developing and equipment of mine 253,417.41 Prepaid expense ore 624,453.02 Garfield mill and power plant 840,231.99 Garfield ore reserve 5,244.05 Accounts receivable 3,961.50 General treasurer . . . 422,216.33 Stores on hand, supplies, copper in transit, etc 2,057,890.93 Five bonds redeemed in cash 5,000.00 Retirement of $4,283,000.00 par value bonds by issuance of stock 4,283,000.00 Cash in banks 188,777.38 $8,784,165.02 "COMPARISON OF ASSETS AND LIABILITIES June 30, 1907, and December 31, 1908 Assets June 30, 1907 Dec. 31, 1908 Decrease Increase Cost of property acquired $5,762,572.00 $5,971,138.82 $208,566.82 Improvements as follows: Garfield mill and ^ power plant . . 3,164,786.87 4,005,018.86 840,231.99 Copperton plant 108,594.41 $108,594.41 Mine surface equip- ment 57,298.24 310,715.65 253,417.41 Prepaid expense - ore 212,467.68 836,920.70 624,453.02 Garfield ore re- serve 5,244.05 5,244.05 Outside invest- ments at cost: Garfield Improve- ment Co 40,000.00 40,000.00 Garfield Water Co 100,000.00 100,000.00 Accounts receivable 90,580.44 117,623.14 27,042.70 Sinking fund 23,081.20 23,081.20 Storehouse supplies and fuel 73,255.71 289,271.59 216,015.88 Equity in copper in transit 425,597.97 1,275,573.96 849,975.99 Cash in banks .... 35,802.68 188,777.38 152,974.70 $10,094,037.20 $13,140,284.15 $131,675.61 $3,177,922.56 COPPER MINES IN VARIOUS OTHER DISTRICTS 217 Liabilities Capital stock out- standing $5,118,000.00 $7,259,500.00 $2,141,500.00 First mortgage bonds out- standing 2,964,000.00 176,000.00 $2,788,000.00 A.S.&R. Co. (treat- ment and refin- ing charges not yet due 47,991.26 342,698.47 294,707.21 Accounts payable . 18,887.36 37,402.35 18,514.99 Sinking fund (not yet due) 16,681.60 16,681.60 Hospital fund .... 11,911.80 11,911.80 Due to General Treasurer 422,216.33 422,216.33 Surplus (amount received above par from sale of stock i 918,000.00 3,059,500.00 2,141,500.00 1 Balance Net Surplus . . . 588,260.65 2,253,271.53 1,665,010.88 Total $10,094,037.20 $13,140,284.15 $3,226,897.93 $6,273,144.88 1 Income Net surplus from Copperton Experimental Plant to June 30, 1907 $588,260.65' Net surplus for 18 months ending December 31, 1908 1,665,010.88 $2,253,271.53 OPERATIONS AT THE MINES "Development. In the last annual report it was stated that the underground developments, on December 31, 1907, amounted to approximately 90,000 linear feet of workings. Since that time we have driven more than ten miles of tunnels, drifts, and raises; but, at the same time, we have destroyed a very large percentage of our underground workings, partially by stoping operations in connection with our underground mining, but more largely as the result of the operations of steam shovels over areas that had been previously blocked out by tunneling and drifting. The areas containing these workings have, to a certain extent, been dug out by steam shovels, but have to a greater extent been caved by heavy blasting incident to steam shovel work, so that they 218 THE COST OF MINING are not now accessible. As a result of the destruction of both old and new workings in the manner above described, we have not now to exceed approximately twenty miles of openings available for use in underground methods of mining, or access- ible for inspection. " References to the map of the company's mining property appended to this report will show the additional area of fully and partially developed ore resulting from the underground work during the period. In the report for the year ending June 30, 1907, the statement was made that the developed and partially developed area amounted to seventy-two acres. Developments since then have resulted in extending this area about eight acres, so that now the known ore area, fully and partially developed, is approximately eighty acres. The ore thicknesses and values of this additional territory are, generally speaking, similar to those described in the former report, so that the new develop- ments have resulted in additional ore reserves to the extent of about 8,000,000 tons, or at a rate during the period of over three times the rate at which ores were extracted for reduction. The net result of the developments we have made during the period has been that fully developed ore remains approximately as stated in our last annual report, viz., 20,000,000 tons, as the area of this class of ore has been increased to an extent that will more than offset the quantity of ore mined. "The two classes of partially developed ore, described in the former report, have been increased in the aggregate to the extent of approximately 8,000,000 tons, as above stated, so that we now estimate 60,000,000 tons in these two classes of reserves. In other words, of fully developed, partially developed and reasonably assured ore, the total amounts to about 80,000,000 tons. Of this total tonnage, 65,000,000 tons can be classed as of the better or normal grade, averaging about 2 per cent, copper, and 15,000,0000 tons as of the lower grade, approximating 1^ per cent, copper. In addition to this, we have the lower zone, as described in the previous annual report, the average value of which has been indicated to only a limited extent by diamond drilling, but which is estimated to contain a minimum of 40,000,- 000 tons that will probably average 1^ per cent. In discussing the above quantities throughout, consideration should be given to the fact that the stated figures include the quantities of ore COPPER MINES IN VARIOUS OTHER DISTRICTS 219 mined during the fiscal period. This would amount, in percent- age, to approximately 3 per cent, of the above described three classes of ore aggregating 80,000,000 tons reserves. " All the development done during the period has been on the easterly end of the property and on both sides of the canyon, a a? Quartzite North End Line Property COPPER MINES IN VARIOUS OTHER DISTRICTS 221 but the larger part of it has been on the south side of the canyon, in the southeasterly portion of the company's territory. The ore-bearing area is still being extended in that direction. "Stripping. Stripping operations since their commence- ment, in August, 1906, have resulted in the removal of 1,705,322 cu. yd. of capping. Of this amount, 1,335,233 yd. have been removed during the fiscal period under discussion. During the first six months of the fiscal period, 367,950 cu. yd. were removed; FIG. 11. Steam shovels at work in pit of Utah Copper Company, Bingham, Utah. during the second six months, 446,460 cu. yd. were removed, and during the last six months of 1908, 520,823 cu. yd. were removed. "The total area over which stripping operations have been conducted to date is 19.7 acres. The average thickness of cap- ping, as disclosed by these operations, remains the same as that stated in our last annual report approximately 70 ft., corre- sponding to 113,000 cu. yd. per acre. The total amount removed is, therefore, equivalent to stripping of approximately 15 acres, and, at the present time, the actual area completely stripped is slightly in excess of 7 acres. 222 THE COST OF MINING "The average cost of stripping, throughout the entire opera- tions from their beginning in 1906, has been approximately 32 cents per cubic yard; this cost covering only the removal of cap- ping and its conveyance to available dumping ground. Apply- ing this cost to the average thickness of stripping removed and ore uncovered, the cost per ton of ore uncovered is somewhat less than 4 .cents. Stripping operations have been more expen- sive and difficult in the past than they will be in the future, on account of the very limited area upon which the shovels could work and the expensive tracks it was necessary to build in start- ing these operations in the narrow canyon. As we develop more room, the rate at which shovels can operate will be increased, and the cost of shoveling correspondingly reduced; but the ex- pected decrease in the actual cost of loading the material will probably be offset by the increased cost of hauling the waste material for greater distances, so that it may be expected that our stripping costs will remain about the same as in the past. "Since the last annual report, we have secured by purchase and lease the surface rights of about 120 acres of ground, outside of our own property, for dumping purposes. Of this total area, 75 per cent, was acquired by purchase and the remainder by lease. The total dumping capacity of this surface amounts to 6,330,000 cu. yd., or the equivalent of the capping overlying 56 acres of ore, using the average thickness of 70 ft. so far deter- mined. As a matter of total capacity, the ground already se- cured will be more than is necessary to accommodate any amount of capping that we will wish to deposit in this vicinity, for the reason that plans are now under way to dispose of the capping in another and profitable manner, as will be hereafter referred to in this report. "Mining. Of the total ore mined during the fiscal period, 33.2 per cent, came from underground, and 66.8 per cent, from steam shovels. During the first six months of the period, the percentages were 39.6 per cent, from underground, and 60.4 per cent, from shovels. During the following six months, the per- centages were 34.6 and 65.4, respectively. During the six months ending December 31, 1908, the percentages were 28.7 and 71.3. During the last three months of 1908, the percentages of under- ground and steam shovel ore were 25 per cent, and 75 per cent, respectively. These figures are given to indicate the gradual COPPER MINES IN VARIOUS OTHER DISTRICTS 223 decrease of underground mining; or, more properly, the steady increase in the quantity of ore mined by steam shovels. "The increase in the volume of ore mined by steam shovels is reflected directly in a corresponding decrease in our mining costs. The average cost of both steam shovels and underground ore for the first six months' period above described was 43 cents; for the second period, it was 35 cents; for the third period, 30 cents. The average costs stated cover, respectively, the total costs of every nature at the mine, including development, as well as their proper proportions of all general and fixed charges, such as office expenses, taxes, and insurance. The average costs for the entire period, as applying to the two different methods of mining, were 66J cents per ton for all ore mined underground and 19J cents per ton for all ore mined by steam shovel a saving in favor of the steam shovel method of 47 cents per ton. " As has been previously stated, the cost of removing the cap- ping from a ton of ore, as shown by our entire experience in the past, amounts to approximately 4 cents. The net difference in favor of the steam shovel method, therefore, becomes 43 cents per ton; this applying to practically all the steam shovel mining we have done, as we only mined a few thousand tons by steam shovels before July 1, 1907. " From the beginning of stripping operations to date, the equiv- alent of 15 acres of ore has been stripped, and the total cost of all this work has been about $550,000. It is proper to add to this, however, a proportion of the cost of grading and laying rail- way tracks about the property and to our dumping grounds for the disposition of capping. The total net cost of such tracks, and of all other construction incident to stripping operations up to date, including general expenses, has been, after crediting retirement fund, approximately $285,000. If we charge all the proper proportion of general expenses and 20 per cent, of all the construction costs to the stripping operations, the total cost, to date, becomes about $690,000. It would not be proper to charge more than 20 per cent, of these construction costs to the stripping already done, because less than that percentage of the area for which these facilities were provided has been stripped. The 43 cents per ton saved on ore mined during the fiscal period by steam shovels, as against what it would have cost to mine the same quantity of ore from underground, amounts to 224 THE COST OF MINING approximately $695,000. It therefore appears that had we charged the entire cost of all our stripping operations, from the date of their inception in 1906 up to the present time, against the steam shovel ore recovered in eighteen months only, it would still have been more economical to mine by the steam shovel method than by the underground method; or, considered in another way, we have stripped 15,000,000 tons of ore, and have mined only slightly more than 10 per cent, of that quantity with steam shovels, but the entire cost of stripping the total quantity of ore could be charged against the mining of one-tenth of it and still the result would show the steam shovel method of mining our ores to be the more economical. "Our costs of steam shovel mining will decrease, rather than increase, in the future, and it is consequently quite evident that our best interests lie in decreasing as rapidly as possible the scope of underground mining and correspondingly increasing our steam shovel output. It will be necessary, for some years to come, to do some underground work, but we will probably be mining fully 90 per cent, of our ore with steam shovels by the end of 1909, and the underground method, as applying to any- thing but the development and mining of isolated, and compar- atively small, bodies of ore, will be gradually, and as rapidly as possible, discontinued. "Up to the present time, surface mining operations have been seriously hampered by our inability to secure from the company transporting our ores to the mills an adequate and regular sup- ply of cars, such as to enable us to continuously and most eco- nomically operate our ore shovels. Our surface workings have been developed to such an extent that by the end of 1909 we should have no difficulty in producing regularly 10,000 tons per day, if an additional unit to the Garfield plant should be decided upon, thus bringing our milling capacity up to the tonnage stated. In the meantime, we could increase our output gradually to the extent of supplying tonnage for the sections of the new unit as rapidly as they could, in all probability, be completed. "The ores that have been mined up to date by steam shovel- ing have not been as high grade as the normal average of the property, because of the necessity of including with them con- siderable quantities of the partially oxidized and lower grade cap- ping. Before steam shovel operations were begun, some parts COPPER MINES IN VARIOUS OTHER DISTRICTS 225 of the area where we are now working were mined out for a thick- ness of 20 to 40 ft., along or below the dividing plane between capping and ore. As this mining was done by caving, the cap- ping settling into the stopes increased the irregularity of the line between ore and capping, and made it impossible to keep the underlying ore as clean as we would have otherwise been able to do. Moreover, aside from this occurrence, which has aggravated the condition, the dividing line between ore and cap- ping is naturally very irregular, and it is impossible to entirely remove all the oxidized material without wasting some good ore. It is therefore necessary to continue taking some of this low-grade material into the ore, until such time as the first cut from off the top of the ore has been removed over a considerable area; in fact, this condition will always apply to newly stripped areas. This feature is the only one of disadvantage that we have encountered in steam shovel mining, but, in the long run, there will be advantages which will very much more than offset it the principal one being that by this method of mining our opera- tions will slowly, but gradually, become more economical, and, in the end, we will have recovered 100 per cent, of our ores; whereas, by any other method of mining, it would be impossible to avoid losing a considerable percentage of them. 11 Equipment. Since our last annual report we have added to the mine equipment two steam shovels, making eight in all; two locomotives, making seventeen in all; and have extended our railroad tracks for mining and stripping purposes to a total of 9.2 miles. During the year 1909 we shall add to our present equipment at least one more shovel and two more locomotives, and shall construct about 6.8 miles of additional standard gage railway for handling capping. OPERATIONS AT THE MILLS "Garfield Plant. In our last annual report, it was stated that four sections of the Garfield plant were in commission. Four additional sections were started one each in the months of August, September, November, and December, 1907; and the remaining four, one each in the months of March, April, July, and November, 1908. During the fiscal period there was in opera- tion the equivalent of 8J sections for the entire period, or about 71 per cent, of the plant. However, the difficulties experienced 226 THE COST OF MINING in obtaining tonnage for the plant, principally through the lack of proper transportation facilities and service, resulted in our only being able to provide 77 per cent, of the rated capacity of that part of the plant prepared for continuous operation, as above stated, or about 55 per cent, of the capacity that the plant is now, and has been since November, 1908, prepared to handle. Had we been able to secure tonnage, the sections of the plant could have been started up more rapidly and the entire plant put in commission at an earlier date. "Copperton Plant. The Copperton plant also suffered from a deficiency of tonnage, but not to the extent that applied to the Garfield plant, partially for the reason that it is closer to the mines. Of the total tonnage treated at both mills during the period, 83 per cent, went to the Garfield mill and 17 per cent, to the Copperton mill. "Production. The total gross output of copper at both plants for the period was 56,895,998 Ib. of copper contained in concen- trates, resulting in a net production of 54,051,212 Ib. after smelter deductions were made. The concentrates produced also con- tained 182,160 oz. of silver and 20,072 oz. of gold. The average grade of concentrates for the period was approximately 27 per cent. "Of the total gross production of copper above mentioned, 43,873,918 Ib. were produced in the twelve months of 1908, this being 77 per cent, of the total for the period. Dividing the eigh- teen months into periods of six months, the respective produc- tions were as follows: Pounds Per Cent. July 1 to D6C6rnber 31 1907 13 022 080 23 January 1 to Jun6 30 1908 20.096,329 35 July 1 to D6C6mber 31 1908 23 777 589 52 Total 56 895 998 100 "Had we been able to secure throughout the period the full capacity of the 71 per cent, average of the Garfield plant that was in operation, we would have produced at that plant alone approximately 62,000,000 Ib. a total, for both plants, of about 71,000,000 Ib. for the period; or an average of nearly 4,000,000 COPPER MINES IN VARIOUS OTHER DISTRICTS 227 Ib. per month. If our entire Garfield plant, which is now in operation, could be supplied with its capacity of 6000 tons per day, and its operation should result in the same percentage of recovery we have experienced in the period under discussion, and upon the same grade of ore, the output for both plants would be at the rate of 96,000,000 Ib. for eighteen months, or an average of 5J million pounds per month, corresponding to a production of 64,000,000 Ib. per annum. This is what we may expect to do in the immediate future, provided transportation for the required tonnage can be supplied; in fact, we can do somewhat better than this on the same grades of ore, if we can have trans- ported all the tonnage needed, as the Copperton plant can also take more tonnage than it has been receiving in the past. "It is to be remembered that the results of the period under discussion have been achieved on an ore containing 4 Ib. less of copper per ton than the average normal contents of our ore. In addition to this, because of the low grade and oxidized mate- rial that has been taken into the ore through contamination of the steam shovel output by capping, the ores have contained an average of fully 5 Ib. of their copper contents in oxidized min- erals, of which only indifferent percentages could be recovered. Both the grade of ore and the percentage of copper recovered will improve gradually as cleaner ore is procurable, as a result of the extension of completely stripped areas. "Cost of Production. --The average price applying to our sales of copper for the entire period was 13.2 cents. The average cost per pound was 8.85 cents, this being based upon the net pounds of copper resulting after smelter deductions and allow- ances were provided for, and including all expenses of transpor- tation, refining, and disposition of the metal. "The deficiency of tonnage, as applying particularly to the Garfield plant, has resulted in the cost per pound of copper being fully a cent higher than it would have been had we been able to secure full tonnage for even the 71 per cent, of the plant averag- ing in operation. As formerly stated, we were only able to mill 77 per cent, of the capacity of the portion of the plant in opera- tion. The additional 23 per cent., which we were unable to mill, owing to the transportation difficulties before mentioned, could have been treated at little or no additional cost for labor, and, in fact, not so great a cost per ton, because a shortage of 228 THE COST OF MINING ore involves us in more expensive methods of handling it through our ore bins. We therefore would have saved the milling labor cost on this additional tonnage, which amounts to more than one cent per pound of copper produced. If both plants could have been operated at their fullest capacity, a still greater reduction would have been made in the per pound cost. Our other costs would not have increased in direct proportion, as, for instance, the mine, if it had been able to load ore continuously, could have done so at a considerably decreased cost per ton. " Capacity of the Gar field Plant. We have been able to oper- ate the Garfield plant at full capacity only for short periods since it was completed, on account of our inability to transport the tonnage. For a few days at a time, however, we have demon- strated that it can handle continuously a greater tonnage than its rated capacity. This determination has also been checked by the capacity of the individual sections, which have proven themselves capable of treating more than their rated tonnage. No difficulties have been experienced in the operation of the plant, and no changes, other than in the way of unimportant details, have been found necessary. Considering the quality of ore we have been reducing, its operation has been, and is, en- tirely satisfactory. " Power Plant. The construction and operation of our own power plant, to provide power for the entire enterprise, has proven of great advantage and economy in many ways. We are assured of a constant and uniform supply of power for continuous opera- tion at all points, and the cost of power at the Copperton plant and at the mines at Bingham has been very much reduced over that applying formerly, when power was generated at Copperton for the operation of that plant and purchased from others for the operation of the mine. As stated in our former annual report, the power plant at Garfield has a greater capacity than is necessary for the operation of our milling plants at their pres- ent capacity, and it will therefore be unnecessary to provide additional power in connection with another 3000-ton unit at the Garfield plant when such addition is made. 11 Dialer Supply. Up to the present time, the springs owned by the company, adjacent to the Garfield plant, have produced ample water for any tonnage we have handled, and it is believed that they will furnish sufficient for the full capacity of the plant, COPPER MINES IN VARIOUS OTHER DISTRICTS 229 without making it necessary for us to resort to the use of our proportion of the water we are entitled to take from the Gar- field Water Company. We therefore have demonstrated con- clusively that our total water supply will be ample for very much greater tonnage than we are now prepared to mill. " Transportation. A number of references have been made in this report to the difficulty we have experienced in securing adequate transportation facilities, as provided for under our contract with the Rio Grande Western Railway Company. Our losses, and the disadvantages under which we have operated, as a result of the failure on its part to give us the desired and neces- sary service, have been greater than would be indicated by the direct deficiency in tonnage that we desired to mine and mill, but which the railway company was not prepared to transport, for the reason that the tonnages that have been delivered to the mills have been handled at a disadvantage and at an extra cost. We have used every effort to induce the railway people to give us better service, but, so far, without very much encouraging result, and we have, therefore, located and surveyed a line for a railroad of our own between the mines and mills. This loca- tion is shown on the appended map of the Bingham and Garfield territory. Negotiations are now pending, which, if consum- mated, will relieve the situation, and give us the transportation facilities we require. If these negotiations fail, I recommend that construction be commenced on our own railway at an early date. "General Remarks. In a former portion of this report, ref- erence was made to a proposed method of disposing of capping. We have found that the 1,705,322 cu. yd. of capping so far re- moved from our orebodies average not quite 1 per cent, copper. Experiments conducted some years ago, and since verified, demon- strate that the larger part of this copper is contained in such forms as can be extracted by a simple leaching process. " As soon as weather conditions will permit, an open-air plant, of moderate capacity, will be constructed at the Garfield mill, and the proposed metallurgy of this material demonstrated on a fairly liberal working scale. If this experiment proves that our former results along this line of investigation are reliable, it is proposed to build a very large leaching plant in which to treat, along the general lines suggested, the capping removed 230 THE COST OF MINING from the property. The chemicals necessary in the proposed method of treatment should be produced cheaply, as a by-product, at any of the smelters adjacent to Salt Lake City." NORTHERN CALIFORNIA COPPER MINES During the last twelve years a considerable output of copper has been obtained in Shasta County from a number of pyrite deposits that are described as occurring in zones of intensely crushed granitic porphyries. The pyrite masses have been considerably enriched by the leaching of copper from the upper portions and the deposition of it in a lower part of the same deposit. It is to be inferred that the original pyrites, below the zone of enrichment, are pretty low grade, probably too low in many cases to be payable. The following description of the industry is copied from the report on the " Production of Copper in 1907," by L. C. Graton of the U. S. Geological Survey. The output of copper for that year is stated at 28,000,000 Ib. "The ores smelted in 1907 yielded approximately 3 per cent, of copper. The yield per ton in gold was about $1.30 and in silver 2.1 oz., or $1.40, which combined are equivalent to 4.5 cents per pound of copper. In the aggregate several million tons of ore are blocked out in the mines of the Balaklala, the Bully Hill, the Mammoth, the Mountain, and the Trinity companies. The limits of these orebodies are now pretty well defined, and it is doubtful if new bodies can be discovered as rapidly as the pres- ent ones are exhausted. The first large body to be worked in the district, that at Iron Mountain, is now nearly worked out, and in spite of the fire which has been burning for several years practically all the ore will be extracted. " Most of the orebodies thus far discovered are developed by workings not more than 500 ft. deep, but the Great Western workings, in the Afterthought district, exceed this depth, and in the Bully Hill district the lowest level is about 900 ft. below the outcrop. Owing to the rugged topography, tunnels afford easy access to the orebodies, but in a few places winzes from these tunnels are required. Open cutting is employed in part at the Balaklala and the Afterthought mines. Water is not trouble- some. Up to the present time square setting has been chiefly employed. At the Mammoth mine the horizontal slicing system, with subsequent caving, is employed, and the quantity of timber COPPER MINES IN VARIOUS OTHER DISTRICTS 231 required, which was large at the start, is gradually being less- ened. Methods requiring less timber may be employed in the mines that are now in the development stage. Native timber is used. Electric power is employed almost exclusively and is derived from the lines of the Northern California Power Com- pany. Much of the coke comes from Australia. The Southern Pacific Railroad crosses the district. The Iron Mountain and Hornet mines are connected with it by a private railway, and the Mammoth by an aerial tramway, which has been replaced by a combination steam and electric road. An aerial tram connects the Balaklala and Trinity mines with the Balaklala smelter at Coram. The Sacramento Valley and Northeastern Railway was completed to the Bully Hill district early in 1908. Work has been begun on a line to the Afterthought district. European labor is employed chiefly. 11 Pyrite smelting is now applied almost exclusively to the ores and is very successful. Even the zincky ores of the Afterthought region are handled by the aid of a hot blast. Some experiments are under way to save the zinc now lost at this plant, and some steps in this direction may be undertaken at Bully Hill also. The Mammoth Company was the largest producer of the year, but turned out only matte, which was converted at the United States smelter in the Salt Lake Valley. The construction of converters, as well as of two additional blast furnaces, however, was practically completed in 1907. During that year the fine ore was shipped mostly to sulphuric-acid works near San Fran- cisco, where the resulting cinders were smelted for their copper. The Mountain Copper Company, owing to the raising of the injunction against its Keswick plant, treated part of its output at that smelter and part at its works at Martinez, on San Fran- cisco Bay, where it has, in addition to a small electrolytic refin- ery, a sulphuric acid and fertilizer plant that utilizes phosphate from Utah and Idaho. The Afterthought smelter shipped its matte to Utah for conversion. Some Shasta County copper ore was treated at the Garfield smelter. The Bully Hill smelter, which has been idle since early in 1906, was enlarged and equipped for pyritic smelting. A reverberatory was also added for the treatment of fines. Work was actively carried on by the Bala- klala Company in the construction of its new 1500-ton smelter until October, when construction was stopped, not to be resumed 232 THE COST OF MINING until 1908. This plant, which will treat the Balaklala and Trinity ores, will make matte, which may be converted at the Mammoth works pending a decision regarding the resumption of construction of the San Bruno smelter." The United States Smelting, Refining & Mining Company gives no information worth speaking of about its operating results. This is unfortunate, for their Mammoth mine is now the largest producer in Northern California. The only report I have seen upon the mining operations of this district is that of the First National Copper Company. This concern took over in 1908 the stock of .the Balaklala Consoli- dated Copper Company, which had evidently been organized on an inflated basis. The new company with a paid-up capital of $1,500,000, bought all the stock of the old one, which was capitalized at $10,000,000. The comparison of the balance sheets of the two companies is rather amusing. The First National Company has no liabilities to speak of except its own capital stock, and no assets except the capital stock of the Balaklala, each amounting to $1,500,000. Turning to the Balaklala balance sheet we discover " Mines and Mining Property" put down at $8,688,777.05. This item was evidently a fancy price put upon the undeveloped and unequipped mining claims a good example of mining finance in boom times. It is also a good example of the wisdom of keeping the item of real estate, the opportunity to mine, out of one's computations of mining cost. Other assets on the Balaklala balance sheet undoubtedly represent real investments, as follows: Cost of outside properties $37,015.77 MINE CONSTRUCTION: Air drill equipment $24,759.23 Locomotives and cars 18,956.23 Aerial tramway and connections 202,499.21 Buildings 49,985.49 Teams and equipment 1,699.43 ^ ^ ^ SMELTER CONSTRUCTION: Smelter $873,682.30 Converter 102,512.60 Steam railroad 83,279.41 Teams and equipment 3,931.28 1,063,405.59 Property in dwellings, etc 88,346.55 Total plant $1,481,667.50 There is in addition working capital in inventories, supplies and cash, approximately $600,000.00 COPPER MINES IN VARIOUS OTHER DISTRICTS 233 We might fairly add to this about $400,000 for the cost of developing the mine and then the total cost of starting the enterprise will amount to approximately $2,500,000. The president of the company has the following to say in the first annual report: " During the year we operated the mine for sixty days and the smelter for fifty-two days. In the commencement of opera- tions we expected to find a number of things that would require alterations and would more or less delay us in getting down to a working basis. I am glad to say that we are gradually over- coming all difficulties and are now producing blister copper. " Attention is called to the fact that we only operated part of two months and one full month, and our expenses are for three full months. " Commencing operations we had considerable waste in open- ing our drifts, which has reduced the value of our ores, but all indications are that the ore developed will average about 2.7 per cent, copper, .025 oz. gold, .75 oz. silver. "Our costs, based on present operations, will be materially reduced when we are mining and smelting to our capacity of 1250 tons of ore per day." At average prices the ore above mentioned would contain the equivalent of 60 Ib. copper per ton. It is not stated whether this is the actual yield, or only the assay value from which losses will have to be deducted. While it is manifestly unfair to calculate costs on the inter- rupted operation of only three months, I give the following costs for what they are worth : BALAKLALA CONSOLIDATED COPPER COMPANY SUMMARY OF MINE OPERATIONS OCTOBER, NOVEMBER, AND DECEMBER, 1908 Cost Per Ton Development - $1,452.47 Mining 29,866.14 Compressor 787.93 Air drills 1,199.62 Mine tramway 1,807.31 Timbering 1,620.97 Power ; 1,560.36 Shop's expense 245.64 General expenses, including taxes and insurance .... 4,250.02 Carried forward $42,790.46 234 THE COST OF MINING Brought forward $42,790.46 $2.284 Surface and road repairs 118.03 .006 Repairs to buildings 197.31 .010 Stable expense 438.10 .023 Steel sharpening 666.36 .035 Special construction 1,244.00 .066 Total cost $45,454.26 $2.424 Ore mined, 18,751 tons. SUMMARY OF SMELTER OPERATIONS OCTOBER, 11 DAYS NOVEMBER, 11 DAYS DECEMBER, 31 DAYS Amount Cost Per Ton of Ore Converters $1,750.77 .070 Blast furnaces 51,095.00 2.035 Matte and slag casting 4,454.52 1.77 Repairs to plant buildings 1,444.51 .057 Repairs to ore bins 2,110.78 .084 Railroad operation and maintenance 2,697.14 .108 Unloading custom.ore . . . -. 1,190.72 .047 Sampling mill for custom ore 887.75 .035 Sampling mill for sulphides 2,253.35 .089 Lighting, electric 1,148.75 .045 Water supply and pumping plant 424.78 .017 Assay office 800.44 .032 General expenses, including insurance and taxes .... 3,199.48 .128 Total expense $73,457.99 $2.924 Ore smelted, 25,121 tons 66,961.50 2.665 Furnace products on hand Total cost (see Balance Sheet) $140,419.49 $5.589 Operating tramway 0.304 Total cost per tori 5.893 Assuming that the 60 Ib. mentioned above represents recov- ered metals, these costs indicate operating costs of about 10 cents per pound. To this will have to be added an annual charge of 6 per cent, on $1,500,000 for depreciation of plant expressed in construction, equal to $90,000 a year. General expense, including taxes, insurance, and administration, will be $35,000 more. On an output of 250,000 tons these items will be 50 cents per ton and the total operating cost of copper will approach 11 cents. The amortization of $2,500,000 invested in the property with COPPER MINES IN VARIOUS OTHER DISTRICTS 235 4 per cent, interest at 15 cents copper and 11 cents cost, equaling 4 cents a pound profit, with an output of 15,000,000 Ib. a year, will require five years operation, 1,250,000 tons of ore, and 75,000,000 V Ib. of copper. Whether the company has this amount in sight or not is not stated. CHAPTER XIII THE COPPER MINING BUSINESS IN GENERAL Division into types Disseminated Ores Cost of producing copper from disseminated ores Outlook in Lake Superior Outlook of new mines in the West Quartz pyrite ores in fissure veins Cost of copper at Butte Anaconda Outlook for the future When all ores must be smelted Variable character of these deposits due to reconcentration of values Outlook for the production of copper from cupriferous pyrite masses The price of copper. GENERAL CONSIDERATIONS WE may divide copper mines into three classes, each present- ing a different economical problem : (I) Disseminated ores in which concentration is the all-important thing, smelting being applied only to a fraction of the material mined. (II) Quartz pyrite ores in fissure veins in which the ratio of concentration is low, the proportion smelted considerable, making the costs usually high. (Ill) Ores that cannot be concentrated and must be smelted in bulk. I. DISSEMINATED ORES The first class contains the Lake Superior qopper ores in which native copper is disseminated, either in porphyry or in con- glomerates derived from porphyries, in the proportion of from 1 to 4 per cent. These ores are concentrated in the mills (with 20 per cent, loss in milling) to from 1 to 4 per cent, of their orig- inal volume. This is the proportion smelted. We have in this group also the disseminated porphyry ore of Bingham, Utah, containing 2 per cent, copper in the form of chalcocite. This ore concentrates with 70 per cent, recovery into 4J per cent, of its original volume. The disseminated ore of Ely, Nevada, which concentrates into 12J per cent.; that of the Clifton-Morenci district in Arizona, which concentrates into 15 per cent.; that of Nacozari, Mexico, which concentrates into 17 per cent. ; the ore of the new Miami Copper Company at Globe, 236 THE COPPER MINING BUSINESS IN GENERAL 237 Arizona; and the Braden copper mines of Chili, may all be in- cluded in this class. These ores now produce a third and will soon yield one-half of the copper of North America, and they may be described as the most important, most profitable, and most promising source of copper. On the basis of the ton mined these ores are far more cheaply worked than any other copper ores. The internal conditions for cheap mining are excellent. The orebodies are large, uniform and firm. There are some, such as Utah Copper, Nevada Con- solidated, and others, which present the great advantage of being accessible to open-pit methods of mining. The cost of concentrating (including transportation to mills) is determined largely by the external factors of the cost of water, fuel, transportation, and labor. The variation is between the figures of 40 cents in Lake Superior to $1 in less favorable situ- ations. The internal factor of the mineralogical complexion of these ores does not, to my knowledge, introduce in this class any great difficulties. The cost of smelting, refining, and marketing this class of ores presents the same external variables as that of concentra- ting. An internal factor of significance is the effect of concen- tration on the fluxing qualities of the ore. In terms of the concentrates smelted we have in general the following factors: (1) The cost and quantity of fuel and flux required for reduction; (2) the richness of the concentrate which determines, a, the cost of converting or bessemerizing; 6, the cost of transportation to market; and c, the cost of electrolytic refining. Manifestly the cost per ton smelted is more a question of the richness of the ore smelted than of anything else; thus in Lake Superior, where the external factors are extremely favorable, the cost of smelting, refining, and marketing per ton of 70 per cent, concentrates is about $15, while the concentrates of Ely, Nevada, carrying 13J per cent, copper smelted and sold under the most costly conditions, are estimated to cost only $10.50 per ton. Manifestly also the supreme factor of cost is the divisor which represents the proportion smelted. In the case of Lake Superior an ore producing only 2 per cent, concentrates divides its cost of $15 per ton by 50, so that, as spread on the ore milled, the cost 238 THE COST OF MINING is only 30 cents a ton. In the case of Ely ores the $10.50 cost can only be divided by 8 and the resultant cost on ore mined is $1.31. The salient facts regarding the cost of mining disseminated ores may be expressed in the accompanying table : COST OF MINING DISSEMINATED ORES Low High M . . {Open pit $0.50 g I Underground 1.25 $2.50 Concentrating 0.40 1.00 Smelting, refining, and marketing 0.15 1.30 Open Pit $1.05 $4.80 Underground . . 1 .80 At the average price of 15 cents for copper, these figures mean that under the most favorable conditions a Lake Superior ore, if it could be mined from an open pit, might meet expenses with a yield of only 7 Ib. per ton. If mined underground about 12 Ib. is the minimum; while under the most unfavorable conditions a yield of 32 Ib. may be required. COST OF PRODUCING COPPER FROM DISSEMINATED ORES The average cost of producing the entire output of copper is hard to determine, because a respectable fraction is sold by obscure mines which may not always be profitable, and whose records are not to be had. I have taken the ground that the price must be controlled by the leading and profitable producers which sell the bulk of the output of each district. In order to form some idea of the cost to such leaders, I have compiled the following information, the justness of which will be evident to any reader. The Calumet & Hecla Mining Company had produced up to June, 1908, approximately 2,040,000,000 Ib. of copper, on which its earnings were approximately $115,000,000 net. This mine had built up its enormous plant almost entirely out of earnings, so that for its forty years of activity its real and complete cost of production must equal the selling value of its output, less the profits. The actual price received for Lake Copper in the last forty years has been almost exactly 15.3 cents per pound. Now the profit of $115,000,000 from 2,040,000,000 Ib. is equal to THE COPPER MINING BUSINESS IN GENERAL 239 5.63 cents per pound. Subtract this from 15.30 cents, and we get 9.67 cents as the cost of the entire product. Similarly, the Quincy mine has produced 413,000,000 Ib. at a total cost of $45,500,000, equal to 11 cents a pound. The Cop- per Range mines, Baltic, Trimountain, and Champion, had produced, up to 1907, 209,000,000 Ib. for $27,316,000, equal to 13.07 cents a pound. The Wolverine had produced, up to 1907, 87,000,000 Ib. for $7,783,000, equal to 8.9 cents a pound. This entire group has produced 2,740,000,000 Ib. for $275,- 364,000, equal to a trifle over 10 cents a pound. Looking to the future it is plain that the cost of copper from the Lake Superior district and from these same mines will exceed this figure. In some former article published in the Engineering and Mining Journal on this subject, I stated that the copper from disseminated, concentrating deposits could be produced for 9 cents. I was misled in making this statement by taking too narrow a view of the situation. The Calumet & Hecla in its ten most prosperous years, from 1897 to 1906, produced 855,- 000,000 Ib. at about 8J cents a pound. This figure, in the light of fuller consideration, appears to be quite 1.4 cents below the average for the life of the mine to date; and still more below the prospective costs. The situation is as follows: During the ten fat years men- tioned above, the mine was in bonanza. The ore yielded quite 50 Ib. per ton. Nearly all the production was from the great conglomerate ore shoot, which has been quite exceptional among Lake Superior deposits in richness. But, according to testimony given by Mr. Alexander Agassiz, the president, and by Mr. James McNaughton, the manager of the Calumet & Hecla, in the Osceola lawsuit, it appears that by 1908 the average yield of the conglomerate had fallen to 40 Ib. per ton, and the yield is stead- ily diminishing. The experience of the Tamarack was that the conglomerate just below the Calumet & Hecla line yielded only 20 Ib. and was unprofitable. It appears probable, therefore, that the remaining ground on the conglomerate is likely to yield not more than a mean between 40 Ib. and 20 Ib., or 30 Ib. per ton. The testimony is that between 20 and 24 million tons of conglomerate will still be produced. This means only 600 to 700 million pounds. It does not seem probable that this will cost less than 11 cents on the average. This is about what it 240 THE COST OF MINING costs on the Osceola lode where worked by the same com- pany. When we remember that it has cost the Quincy 11 cents, that it is costing the Osceola Consolidated 12 cents, the Mohawk over 11 cents, it does not seem likely that there is any prospect of any great output below that figure. The Wolverine is indeed producing for less than 8 cents, but its output is so small as to have little effect. The Copper Range mines can hardly expect to fall under 11 cents for complete costs. Their product thus FIG. 12. Pit at Bingham, Utah. far has cost over 13 cents, but this includes the whole cost of equipment. A deduction of 2 cents a pound for the 209,000,000 Ib. produced by the Copper Range mines makes over $4,000,000, which seems to be all that should be charged to the future for plant. It seems, therefore, that if the Copper Range can cover all expenses for 11 cents, it will do very well. When we consider that these figures are for the best mines in the district, and that the factor of increasing depth increases both the cost and the danger of impoverishment, we may con- THE COPPER MINING BUSINESS IN GENERAL 241 elude, I think with safety, that there will be no real profits from the Lake mines under 11 cents, and very little under 12 cents. COST OF MINES OF DISSEMINATED COPPER ORES IN THE WEST This industry really belongs to the future. While some disseminated ores have been mined for years at the Clifton-Mo- renci district in Arizona, and at Nacozari in Mexico, it is only with the launching of Utah Copper, Boston Copper, Nevada Consolidated, Miami Copper, and Ray Consolidated, that mines of this class have become important. The full effect of these producers will not be developed for some years, but they all report great quantities of ore in sight and enough operating has been done to throw some light on the probable results. The ore reasonably to be counted on is reported somewhat as follows : Bingham, Utah 100,000,000 tons at 22 - 2,200,000,000 Ib. Ely, Nevada 33,000,000 tons at 30 = 1,000,000,000 Ib. Globe, Arizona 100,000,000 tons at 30 - 3,000,000,000 Ib. Ray, Arizona 80,000,000 tons at 25 - 2,000,000,000 Ib. Others 40,000,000 tons at 30 = 1,200,000,000 Ib. Total 353,000,000 tons at 26 = 9,400,000,000 Ib. It appears further that there is still a probability of sufficient development of new ore to make good the estimate of copper production in spite of any losses in mining. In the case of Utah Copper, Boston Consolidated, and Nevada Consolidated, a large amount will be mined with steam shovels in open pits, where there will be no mining losses. The remaining ore will be sub- ject to underground losses that probably will not average more than 15 per cent. Referring to the analysis in the preceding chapter of the cost of producing copper by the Utah Copper Company, it will be seen that an estimate is given of cost on the basis of an average annual production of 75,000,000 Ib., or its equivalent, as follows: Operating costs 8.5 cents Depreciation = $300,000 a year for new construction .4 cents Total dividend cost 8.9 cents Add amortization $560,000 a year 8 cents Total selling cost 9.7 cents There are not yet available for Nevada Consolidated any such figures on costs as are now afforded by Utah Copper, but it 242 THE COST OF MINING is currently reported that it is producing copper at a cost of 7.35 cents. Probably the value of gold and silver is deducted from the cost. If we figure in this gold and silver as the equivalent of copper we increase the cost by about 10 per cent., which would bring the actual cost up to about 8.1 cents for operating. Assum- ing that the depreciation and amortization charges will be the same as in the case of Utah, we have the following: Copper, silver, and gold in ore realizable equals the equiv* alent of 33 Ib. copper per ton. Operating cost 8.1 cents Depreciation 4 cents Total dividend cost 8.5 cents Amortization 8 cents Total selling cost 9.3 cents The remaining properties in the group have no experience that warrants making anything but an engineering estimate, but we have the estimates of Mr. J. Parke Channing for Miami, and Mr. D. C. Jackling for the Ray Consolidated, that the copper at those properties can be produced at 9 cents a pound. If these estimates are upon the same basis of calculation as those given in the annual statements I shall have to translate them into my own language as follows : Operating cost 9.0 cents Depreciation cost 4 cents Total dividend cost 9.4 cents Add amortization 8 cents Total selling cost 10.2 cents The whole matter resolves itself into the following calculation. Dividends will be paid from these properties on the basis of cost for Utah copper 1,750,000,000 Ib. at 8.9 cents Nevada consolidated 780,000,000 Ib. at 8.5 cents Miami and Ray l ' 1,300,000,000 Ib. at 9.4 cents Average for 3,830,000,000 Ib. at 9.0 cents 1 1 doubt if the Ray district can produce copper so cheaply. I prefer an estimate of dividend cost of at least 11 cents for that district. The fact of the matter is that the new Porphyry mines cannot produce copper at notably low costs except where they may be worked with steam shovels. How far this method can be extended among this class of deposits is a doubtful but highly interesting question. THE COPPER MINING BUSINESS IN GENERAL 243 The minimum selling price justified is obtained by adding an estimated amortization of capital of T 8 ff of a cent per pound, making the total real cost 9.8 cents per pound, say for round numbers, 10 cents for practically 2,000,000 tons of refined cop- per. II. QUARTZ-PYRITES WITH Low CONCENTRATION Of quartz-pyrite ores I have given the conspicuous examples of Butte and of the Wallaroo and Moonta. There is substantial agreement on the following points: (1) A high mining cost owing to, a, high development cost due to searching for ore shoots through much barren vein material; b, considerable selection of ore in the process of mining; c, soft ground requiring elaborate timbering and filling. (2) A high concentrating cost due in part to the use of hand sorting, but particularly to the careful milling methods required to prevent undue losses. (3) Smelting costs are high because, first, a low degree of concentration gives a large proportion to smelt (from 25 to 50 per cent.) ; second, because the siliceous and aluminous character of the gangue renders smelting rather difficult; third, because the ore as mined is necessarily of fairly high grade. The external conditions in Butte are somewhat less favorable than at the Wallaroo and Moonta, but in neither case are the high costs due to them. I believe that high costs are inherent to quartz-pyrite ores in fissure veins. Australia Montana Mining $4.68 $3.78 Milling 1.00 Smelting, refining, and marketing 2 37 4.62 General expenses 0.58 $8.63 $8.40 Applying to these costs the average price of 15 cents per pound copper, it is evident that such ores must yield about 60 Ib. copper or its equivalent in order to pay expenses. With the impoverishment of the ores with increasing depth, costs have increased, until to-day the average Butte copper must cost more than 11 cents and perhaps 12 cents. At the Wal- laroo and Moonta copper has averaged in cost almost exactly 244 THE COST OF MINING 10 cents, and lately as high as 15 cents. The last figure, how- ever, was an incident of the boom of 1906, and must be consid- ered abnormal. Other mines of this class are the Old Dominion and others on the great fault fissure of Globe, Arizona, and in part, at least, those of Cananea, Mexico. Whatever geological grouping may be appropriate, the economic results are similar to the illustra- tions given, and bear out emphatically the generalization that cupriferous pyrites with a highly siliceous and aluminous gangue, occurring in shoots in fissure veins, are essentially high-cost ores at every stage of the process. COST OF PRODUCING COPPER AT BUTTE Let us examine critically the record of the Anaconda Copper Mining Company to get some light on the past and future cost of metal at Butte. At the beginning it is well to explain that the record is only a broken one, there being no reports showing the exact condition of the company for a period of seven years, from 1898 to 1905. During this dark age there were indeed some scraps of information given out, but the output, even, has not been stated with authority. We have, however, enough information to enable one to make some fairly accurate deduc- tions as to the past and future cost of production. The present company was reorganized and began business July 1, 1895. It had at that time little or no surplus in its treas- ury. Up to April, 1908, it had paid $39,500,000 in dividends, and had accumulated a surplus of $6,261,000. It seems fair- to conclude that in 12 J years the earnings were $45,500,000. This had been obtained from an output which, as just mentioned, is not stated with authority but is approximately 1,228,000,000 Ib. copper, 45,365,000 oz. silver, and 196,000 oz. gold. The average price of metals for the period was 15 cents for copper, 57 cents for silver, and $20 for gold. It is not strictly accurate to apply these prices to the entire output, but as the output has been fairly uniform for the period there is no likelihood of inaccuracy sufficient to throw our calculation far astray. Let us now convert the silver and gold into their equivalent in copper at 15 cents a pound. We find that THE COPPER MINING BUSINESS IN GENERAL 245 45,365,000 ounces silver at 57 cents equals 172,387,000 Ib. 196,000 ounces gold at $20 equals 25,968,000 Ib. Add the copper metal 1,228,000,000 Ib. We get the total copper equivalent 1,425,455,000 Ib. By dividing the profit of $45,500,000 by $1,425,000,000 we get the average profit per pound, which is 3.19 cents. Subtract this from the average price of 15 cents, and we have the cost, which equals 11.81 cents per pound. Of course if the value of gold and silver were deducted from the cost and the remaining, sum only charged against the copper, the latter would be sub- stantially cheaper, but that does not seem logical. Let us now leave the sphere of approximations and examine those parts of the record where exact figures are given. In the two years ending June 30, 1897, we find that the total output was as follows : Value Tons dry ore 2,681,623 Pounds refined copper 239,400,895 $25,041,240 Ounces silver 11,249,792 7,387,965 Ounces gold 38,680 798,000 $33,227,205 The copper equivalent is 317,660,000 Ib., this being equal to 118.5 Ib. per dry ton. The total expenses for the period were $24,855,214.29 and the cost per pound for operating was therefore 7.825 cents. To this may be added a total increase of capital accounts of $967,- 641.70. If we write this all off to operating the cost is increased by 0.304 cents and the total becomes 8.129 cents per pound. The total cost per ton was $9.23. After making the reports of which the above is a summary, the company issued no reports till 1905. We have satisfactory reports for the years 1905, 1906, and 1907. This period represents the progress of the company for an average of nine years. For the three final years the record was: Tons produced 4,075,725 Copper metal, Ib 253,363,226 Silver, oz 8,098,139 Gold, oz 43,420 Equivalent in copper 286,136,000 Copper equivalent per ton, Ib 70.02 246 THE COST OF MINING Total receipts $50,089,139 Dividends paid $16,650,000 Net diminution of surplus 769,000 Actual profits 15,881,000 Net value per Ib. copper 17.514 cents Net profit per Ib. copper 5.553 cents Net cost per Ib. copper 11.961 cents Total cost per ton > $8.394 The meaning of these figures is so obvious as scarcely /to require comment. We find the mines producing practically the same tonnage as nine years before. The cost per ton has dimin- ished $1.24. The yield of ore has diminished from 118.5 Ib. to 70.2 Ib. per ton, in spite of the fact that the later production has been helped out a little by the re-working of slags from the earlier period. The diminution in the grade of the ore has far out- weighed the diminution of cost per ton, so that the cost of copper has risen from 8.129 cents to 11.961 cents, a net increase of 3.832 cents per pound. It is fair to remark that the costs in the latter period were adversely affected by the shortening of hours of labor, increased wages, and the general inflation of prices of a boom period; but it must be noted that these adverse conditions did not become acute until the middle of 1906, and in any event cannot go far in accounting for the great cost increase. I am not fully qualified to express an opinion as to how far the experience of the Anaconda represents that of other Butte mines, but all indications are that it represents them pretty accurately. We find that at the earlier period the Anaconda was producing better ores than any other mines have recently produced. Some rich ore has been found in the lower levels, below 2000 ft. in depth, but not enough to arrest the decline in metal contents for the total output. There is, of course, no rea- son to doubt that by careful selection of ores the decline may be temporarily overcome, but this can only be by a proportionately rapid depletion of reserves. It seems perfectly certain that the selling cost of Butte copper is fully 12 cents a pound and is constantly rising. The rise is not likely to be stopped by anything short of a diminution of output, which would be caused by the extensive selection of ores in order to bring them up to a higher grade. A good deal can undoubtedly be done to hold costs down. Whenever it is imperative wages THE COPPER MINING BUSINESS IN GENERAL 247 can be cut. A diminished output at profitable cost is better than a large output without profit. The Anaconda mines are undoubtedly developed and worked somewhat in advance of the average of the district, because they are the oldest. How far in advance they are cannot be stated, but the logic of events to date is that in ten years more, if tonnage is maintained, this property will be no longer profitable. III. WHEN ALL ORE MUST BE SMELTED I have given as examples of the third class of copper mines; i.e., that in which all the ore must be smelted, Bisbee, Arizona, Tennessee Copper, Utah Consolidated, Granby Consolidated, and Mount Lyell. To this list might be aded the Rio Tinto pyrite mines of Spain and Portugal, the mines of Shasta County, California, United Verde in Arizona, Cerro de Pasco in Peru, and others of less importance. Economically we may make the following distinctions in this class: (1) Cupriferous pyrites in an advanced state of alteration and reconcentration, so that only a small part of the original mass can be mined. In this case mining costs as well as smelt- ing costs are inevitably high. Bisbee, Arizona, is a good example. (2) Cupriferous pyrites in their original state or moderately enriched. In this case there is usually presented a large mass of homogeneous ore easily mined and easily treated. Tennessee Copper, Utah Consolidated, and Mount Lyell are examples. At these properties the cost per ton is from $4.20 to $6. (3) Disseminated, self-fluxing ores not very pyritic. Granby Consolidated is an example. Speaking generally, it must be admitted that mines of class III produce a goodly proportion of the world's copper. The list of big producers includes the Rio Tinto, the Copper Queen, Cal- umet & Arizona, United Verde, and many other mines not so big, but very profitable. Rio Tinto seems to produce the cheap- est copper in the world, but I believe this is due to the fact that the sulphur is also utilized to an important extent. Leav- ing out this case, in which copper only costs 5 cents per pound, it does not seem probable that much copper from these ores is produced at less than 10 cents per pound. 248 THE COST OF MINING Taking a number of mines of this class of which we have records for a considerable period, we find the following: Pounds of Copper Equivalent APPROXIMATE COSTS Dividend Cost Selling Cost 308,000,000 166,000,000 42,000,000 115,000,000 70,000,000 100,000,000 40,000,000 Copper Queen, 5 years 9.0 8.9 17.3 7.35 11. 8.35 11. 12. 10.0 cents 9.4 cents 20.0 cents 8.06 cents 17. 9. 15. 14. Calumet & Arizona, 5 years Superior & Pittsburgh, 3 years Utah Consolidated 6 yea.rs Granby Consolidated, 3 years Mount Lyell 4 years First National, 3 months Tennessee Copper, 6 years Calculating out a rough average from these figures it appears that this group of mines has averaged a dividend cost of 9.4 cents and a selling cost of 10.8 cents for the period mentioned. It is very well worth remarking that where the original pyrite masses are highly altered and the payable ores concentrated into small portions of the original orebody, rich ores have often been developed out of material which was originally too low grade to pay. This is the case of Bisbee, Arizona, and in Shasta County, California, and probably at Cerro de Pasco. Such bonanza ore- bodies are sure to be variable in their output and may come to a sudden end. They are exasperating to the mining engineer who tries to calculate their possibilities, and dangerous to the investor. It is seldom possible to put much ore in sight, or to count with assurance on a long life for the property. Neverthe- less they are often exceedingly profitable. Where certain portions of the orebodies are enriched, but the original masses are still payable, the mines may exhibit painful variations in cost and profits, but still remain prospectively val- uable for a long time ahead. Such cases are the Utah Consoli- dated, which has had a bad year, the Mount Lyell, and probably the United Verde. Where the pyrite masses are in their original condition they are apt to be uniform and reliable producers. Undoubtedly the Rio Tinto mine in Spain has a longer assured life and more stable THE COPPER MINING BUSINESS IN GENERAL 249 operating conditions than any other copper mine in the world. The Tennessee Copper property is apparently the only mine of this class in America, but probably others will be developed. THE PRICE OF COPPER I feel very confident that the analysis of costs demonstrates as valid the following conclusions : 1. No copper can be produced in" North America under present economic conditions at a profit for less than 10 cents a pound. 2. At 11 cents a pound only half the present output can be produced. 3. At 12 cents many of the largest producers would only be getting a new dollar for an old one. 4. At 15 cents the business as a whole is prosperous and profit- able only to an entirely legitimate degree. 5. As long as the demand increases as it has increased stead- ily for the past quarter century, it is safe to count for the next ten years on an average price of 15i cents, which has been the approximate average for the last ten years. CHAPTER XIV LEAD Lead mining in general Division into three economic types Dissemi- nated ores Fissure veins Ores resulting from concentration of mixed sulphides Production of lead by states Southeast Missouri Occurrence of ores Exploration Mining Milling Smelting Calculations of aggregate capital required and results Cost of lead from this district. LEAD MINING WHILE a geological description of lead deposits would be rather tedious and difficult to make, a classification of lead ores from an economic standpoint is easy. As in the case of copper they fall naturally into three groups. 1. Disseminated sulphide ores that can be concentrated in a high ratio, i.e., where far the greater part of the material mined can be discarded mechanically as waste, leaving only 3 to 10 per cent, to be smelted. 2. Fissure vein deposits, almost always carrying an impor- tant amount of silver, and often gold and copper. Such ores concentrate in a moderate ratio. From 10 to 35 per cent, must be smelted. 3. High-grade bunches of carbonates or sulphides already concentrated by nature so that the ore must be smelted as mined, the only rejection of waste being by hand sorting. Without going much into detail it will be interesting to pur- sue the characteristics of these ores a little further. 1. In the United States practically the only disseminated ores are those of the Mississippi Valley region, principally in Missouri. They have been deposited by waters circulated from the surface downward, and depositing lead ores in the beds of limestone most favorable, through their chemical or mechanical structure, for the reception of such ingredients. These deposits are invariably sharply limited in their extension downward. 250 LEAD 251 They are confined to certain beds that the geologist can soon recognize. The horizontal extent may be very great, sufficient to give these deposits great importance and a long prospective life. The southeast Missouri district is by a good margin the most productive in the world. Here the mining conditions are closely parallel to the copper districts of Lake Superior and to the newly developed disseminated copper ores of the West. This holds good as to costs. As in the case of copper ores of this class, the total cost of production per ton of ore is between $2 and $3. The lead ores of this class are about three times as rich as the copper ores, hence the cost of lead is only one-third the cost of the copper; a fact that, as a corollary, holds good with regard to the selling price of the metal. 2. The fissure vein deposits are of much greater geological complexity and interest. The Coeur d'Alene mines belong to this class. They are for the most part original deposits caused by hot waters ascending along fissures from great depths and from an unknown source. There is nothing simple about the process either geologically or chemically. The fissures were not simply open cracks in the rock, they were more apt to be crushed zones where the circulation of water was often brought to a stop by the infiltration of minerals and again started by renewed fissuring. There were thus several distinct periods of mineralization. Sometimes the successive mineral- izations were of the same character, sometimes of quite diverse characters. In the case of the principal deposits of the Coeur d'Alenes the lead ores were deposited at the expense of, and replacing, certain iron carbonates that had been deposited earlier. The iron carbonates had often replaced large quantities of the orig- inal quartzite rock in the fissure zone. There had been a still earlier mineralization of quartz and iron pyrites along still earlier fissures. After the lead had been deposited there was a recur- rence of deposition of the iron carbonates which attacked some of the lead sulphides. All these complicated processes were of deep-seated origin. After the real mineralization had all ceased the orebodies were exposed to the effects of the circulation of surface waters. As the surface was slowly eroded away the air-carrying waters from the surface reached gradually deeper and deeper into 252 THE COST OF MINING the original deposits, attacking and rearranging the minerals, enriching some parts of the orebodies and impoverishing other parts. In the Coeur d'Alene mines, the effect of the last process upon the value of the ores was not very great. The oxidation did not affect the veins more than a few hundred feet down from the outcrops. The far greater portion of these deposits is orig- inal, and the mineralization promises to extend far downward. In other words, the surface action has nothing to do with the depth limit of profitable mining. That limit is quite unknown. Wherever the end of an orebody has been found the geological reason for it has either been that the fissure entered a different and less favorable rock formation, or else the reason for termina- tion is obscure. Certain formations of quartzite are now recog- nized as being far more favorable for the deposition of lead, ores than others. With this sole limitation the Coeur d'Alene veins promise to be productive to very great depths. Other great lead-bearing fissures have a somewhat different character. The great Broken Hill lode in Australia, which has produced more than $325,000,000 in gross value of lead and silver, from which over $60,000,000 has been paid in dividends, is mineralogically as much of a zinc deposit as a lead deposit, though the proportion of silver is nearly the same as in the Coeur d'Alenes. At Broken Hill the effect of surface waters in re- arranging the minerals was of capital importance. Although the original ores have been proved to be payable, the metallurgical difficulties encountered upon passing from the oxidized zone into the unaltered sulphides were so serious as to bring the devel- opment of the mines for a time almost to a standstill. A brief further description may be interesting. The Broken Hill lode is one of the greatest mineral deposits of any kind in the world. It is certainly the greatest of its class. It is some 2^ miles in length and contains ore shoots as much as 300 ft. thick of massive ore averaging some 35 per cent, in lead and zinc sulphides. The geological relations of the mass are somewhat obscure. At one time it was thought to be conclu- sively proved that it was a "saddle reef/' i.e., a bed folded back upon itself so as to form a deep trough, approximately len- ticular in cross-section and plunging to the south. I believe doubt has been thrown on this explanation, which seems a little LEAD 253 improbable. At any rate it is a huge, highly mineralized mass, acting in all essential respects like a fissure vein, in a region where the rocks are highly metamorphosed and compressed. The original minerals seem to be in the proportion of lead sulphides, about 15 per cent., zinc sulphides about 20 per cent., with a gangue of quartz, calcite, garnet, and rhodonite. The metallic assays are lead and zinc, each about 13 per cent., and silver 5 to 10 oz. per ton. In the lower parts of the mine the ore forms a hard compact mass, containing no waste, in which the valuable minerals are closely knit together with the gangue, making the concentration and separation of the metals difficult, expensive, and unsatisfactory. But the surface waters, to a depth of from 250 to 400 ft., had removed the zinc and left a bonanza orebody containing 33 per cent, lead and 20 to 30 oz. silver; an ore of easy metallurgical treatment accessible to min- ing in an open pit. At the surface, therefore, the realization of the values presented no difficulties even in the Australian desert; but when it suddenly became necessary to separate a lessened percentage of lead from an obstinate accompaniment of zinc (for the two metals cannot be smelted together), facing at the same time a loss of half the silver, in a region where water was scarce and everything expensive it required a good part of the money earned from the surface bonanza to solve the problem. It required nothing short of discarding the old smelting plants altogether and beginning anew; worse than that, experimenting with new processes. The outcome has been that the original ores have proved to be payable, but to a diminished degree. Lead can no longer be produced so cheaply, while the great masses of zinc ore, formerly discarded, have become valuable and a formidable factor in the zinc market. Under no circumstances, however, can the original ores become anything like so valuable as the altered surface ores (except, indeed, through their much greater volume) . Lead ores from such fissure veins as the above bear a close economic as well as natural resemblance to the copper mines on fissure veins. It will be noted that the costs in the Cceur d'Alenes and at Broken Hill, per ton, are not far from those of the copper mines of Butte, of Wallaroo, and Moonta, and of the Old Dominion at Globe, Arizona. The total cost for the whole process is from $6 to $10 per ton. As noted in the case of 254 THE COST OF MINING disseminated ores, the lead is about three times as abundant as copper, justifying prices inversely proportional. 3. The third class of lead ores, simply smelting ores, are nearly always of an origin similar to the surface ores, just described, of Broken Hill. They are usually the result of the reconcentration of mixed sulphides of iron, zinc, lead, and cop- per. It very often happens that the original ores are quite unpayable, owing either to their low grade, or to the fact that their volume is insufficient to warrant the expensive installa- tions of plant necessary to work them. Lead ores of this kind usually form an insignificant fraction of the ore deposits from which they are derived, but often they are of high grade both in lead and silver, are near the surface, and can be mined profitably even in small quantities. For this reason a considerable amount of lead and silver is derived from a multitude of small shipments of this kind of ore, from hundreds of different places. In some few cases, such as Leadville, Colorado; Tintic, Utah, and Park City, Utah, such ores have been important sources of lead. In those camps the rich lead ores have been the principal resource of some of the mines. A certain amount of concentrating ore is obtained with the high-grade ore, but in each case, if the high- grade ore were absent, the lower grade ore would not be payable. Other districts producing this type of ore are Eureka and Pioche, Nevada; Aspen and Creede, Colorado, and Santa Eulalia in Mexico. I shall give no very clean-cut examples of the cost of mining these ores. Those of Park City will give a general idea. The cost per ton in general for this class is high, certainly not less than $20 per ton for mining and smelting. In Park City the cost is between $10 and $15 for mining alone, to which must be added for freight, smelting, refining, and losses from $20 to $25 a ton more, making a total of $30 to $40 a ton. Ores of this class bear a close parallel in manner of occurrence, methods of exploration, and high costs to the similarly derived copper ores of Bisbee, Arizona. LEAD PRODUCTION OF LEAD BY STATES 255 State 1907 1908 Arizona 2,200 1 867 California 850 490 Colorado 47,332 26707 Idaho 111 697 98394 Kansas . 1,800 2,400 Missouri 123,613 125 216 Montana 2005 2 309 Nevada 3,400 3,676 New Mexico 1,900 611 Oklahoma 400 1 000 Utah 54,738 43,995 Wisconsin 3,500 3486 Other states 1,204 600 Undistributed 2,026 Zinc smelters . . 1,320 1 290 Total 355,959 314,067 The above table will show at a glance the sources of lead supply in the United States and their comparative importance. I propose in the following pages to give an idea of the state of the business in Missouri, Idaho, and Utah. These three states produce more than 80 per cent, of the total for this country. A chapter is added by Mr. W. R. Ingalls (The Mineral Industry, 1908) on Silver Lead Smelting in the United States, to show not only the relations of the Western mines to the custom smelters of the country, but also the business results of the American Smelting and Refining Company, by far the largest factor in the smelting, refining, and marketing of lead and precious metals in North America. Missouri is first in the list of states in the production of lead ores, and first in that of zinc ore. The mining is confined to two districts, the southeast and the southwest. The southeast dis- trict produces ores from which, in round numbers, 100,000 tons of pig lead are smelted yearly ; from the ores of the southwest or Joplin field the product is 25,000 tons of lead and 140,000 tons of spelter. In both fields the external conditions are favorable. Mining is conducted in the midst of the great agricultural regions of the 256 THE COST OF MINING Mississippi Valley, where the cost of living is low, labor abundant, fuel and transportation cheap, and markets close at hand. The internal factors also are favorable to low costs. The depths reached are not great, the orebodies are fairly large. In south- east Missouri the orebodies are persistent, though somewhat irregular, while those of the Joplin field are not only irregular, but non-persistent. In both districts, however, exploration by drilling provides against underground perplexities. In both fields also, the ores are favorable for water concentration. In the southeast district there is, unfortunately, little to be found in the way of reports of mining companies. The follow- ing notes are from my own observation, and while I cannot vouch for the accuracy of the figures as representing any particular property, I believe that they may be taken as fairly representing the district as a whole. SOUTHEAST MISSOURI LEAD Mining in southeast Missouri is based on orebodies that carry an average of about 5 per cent, in metallic lead, or a little more. The ore is called disseminated from the. fact that the galena is often sprinkled through the limestone, although usually most of the lead is confined to rich streaks. The ore concentrates well and can be turned into a 65 or 70 per cent, product, with a saving of 80 per cent. Commercially speaking, therefore, the ore yields about 4 per cent, net lead. Developments have proved that the orebodies are exceedingly persistent and extensive, though they show such irregularities that it requires time to demonstrate this. The formation lies approximately flat, though grades of from 3 to 10 per cent, are not uncommon. It has, throughout the district, a gentle dip toward the southwest. The ore now being mined occurs in the lower 100 ft. of the St. Joe limestone, and often at the very bottom of this formation in contact with an underlying sandstone. Occasionally it happens that in the 100 ft. just mentioned there are successive enrichments, making workable orebodies one above the other. In this case more than one level may be necessary. But it is more common to find only one large irregular sheet of ore immediately above the sandstone, so that it can all be worked from one level; although sometimes the ore may shoot up some distance above LEAD 257 the general level. The upper orebodies are relatively unimpor- tant. In the Flat River district proper, these orebodies are arranged in several parallel zones trending N. 50 degrees W. These zones lie in a space about 3| miles wide from N.E. to S.W., and 258 THE COST OF MINING about 9 miles from N.W. to S.E. It is expected that these zones will be extended materially both to the northwest and to the southeast. I think there is also very good reason to expect that other zones will be developed southwest of those now worked. There are some indications already of three such new zones at the west end of the district. I do not know why the ore follows this N.W.-S.E. course. I have never been able to see any system of persistent fissuring in' that course. Most of the fissures have a course of E.-W. to N.E.-S.W. These fissures have a most obvious relation to the orebodies, which often follow them out long distances on either side of the real ore channel. The sketch, Fig. 14, shows this relation in plan. The ore FIG. 14. Sketch showing relation of orebodics to fissure, S. E. Missouri. zone may carry some lead scattered through the rock on both sides of the workable channels, which may be only 5 ft. wide. The fissures are apparently the source of the ore from which it has fed out into the surrounding rocks. The richest ore, there- fore, is right at the fissure, and it fades out on either side, so that midway between fissures the ore may be too poor to work. Fig. 15 is a longitudinal section of the ore zone across the fis- FIG. 15. Sketch showing cross-section of orebodies in S. E. Missouri. LEAD 259 sures, showing this relation. The ore is workable to a thickness varying from 6 ft. to as much as 100 ft. EXPLORATIONS IN THE SOUTHEAST DISTRICT It will be evident from the above that the exploration of these orebodies by the sinking and drifting methods used in West- ern mines would be difficult and unsatisfactory. To follow the ore underground, it is almost necessary to stope the ore as you go. There is enough vertical irregularity to prevent following the ore successfully by horizontal drifts; and there is enough horizontal irregularity to make it impossible to keep in the chan- nel, unless you are prepared to follow up each turn. If the ore rises you must be prepared to go up after it; if it sinks you must go down after it. The problem of blocking ore out ahead has resolved itself entirely into diamond drilling from the surface. This varies in difficulty according to the depth. The formation dips slightly toward the southwest, while the surface rises a little in that direction. The southwestern part of the field is, therefore, the deepest part. In the older mines at Flat River, the depth to the sandstone is only 300 to 400 ft. In the newer mines like the Derby (Federal) and the Hoffman (St. Joe) the depth is 500 to 600 ft. In the deepest part, between Leadwood and Iron- dale, the depth is from 500 to 800 ft. When the depth is not over 550 ft., the drilling is all through very favorable rock; but where it is deeper, the cherty Potosi limestone comes in. This cherty formation is very hard to drill through, and it is best, whenever it is found, to use a churn drill through that formation, and then put in a diamond drill. The drill is used first to find out in a general way the posi- tion of the ore channel by running a line of holes N.E.-S.W. at intervals of about 200 ft. When lead ore is found that looks worth following up, holes are put in closer in the attempt to follow it in its usual N.E.-S.W. course. If ore is found in con- siderable amount in 15 or 20 holes, enough is blocked out to justify sinking a shaft. As a general rule it is not found desir- able to try to map out the orebody accurately by drilling until some progress has been made in stoping it, and more knowledge gained about its peculiarities. Owing to the soft nature of the richer ore streaks, the drill 260 THE COST OF MINING cores invariably give an underestimate of the value of the ore. Even where ground is most carefully drilled, the actual mining shows from 20 .to 100 per cent, more lead ore than the drilling would indicate. It is very common to have blank holes in the middle of a good orebody through grinding up of the ore streaks. Owing to the irregular shape of the deposit, some poor ground is apt to run into the middle of the space occupied by the ore. For these reasons it often happens that one-half the holes, even in good stoping ground, do not indicate pay ore. The cost of drilling for many years went constantly upward, owing to the increased price of diamonds and of labor. Where drilling could be done ten years ago for 40 to 50 cents a ft., in 1907 it cost from $1 to $1.25 per ft. In the deeper holes, where the Potosi limestone must be penetrated, the cost probably aver- ages $1.50 per ft. Perhaps recent events have reduced these costs again. The above description refers especially to the mines in the vicinity of Flat River only. At Bonne Terre the orebodies are a little different, in that the longer axis there seems to extend N.E.-S.W., instead of N.W.-S.E. These orebodies are northeast from the ore zones of Flat River. It now seems very probable that a connection will be established between Bonne Terre and the Flat River orebodies. EXTENT OF THE DISTRICT The Flat River district proper, containing developed mines, is a quadrilateral area of about 30 sq. m., or 19,000 acres. If we extend the lines so as to take in Bonne Terre and Irondale, we get a triangular area of about 60 sq. m., or 38,000 acres. This area is now producing metallic lead at the rate of about 100,000 tons a year. The output doubled between 1901 and 1907. Outside of this area are a number of other places where ores of the same kind have been mined. At Doe Run, Frederick- town, and Mine La Motte are important occurrences which differ from the above-described field only in that they are in shallower basins of limestone, which are interrupted by knobs of pre-exist- ing granite. At Fredericktown the ores carry, besides lead, copper, nickel, and cobalt. At the North American mine at that place considerable ore has been found that carries 5 per cent, copper and 2.5 per cent, nickel and cobalt. Everything LEAD 261 indicates that there are possibilities of extension in copper mining in that neighborhood. The copper ores have exactly the same structural characteristics as the orebodies above described, except that, instead of pure galena, the ore is mainly sulphides of copper, nickel, and cobalt. PROBLEM OF MINING IN THE SOUTHEAST DISTRICT The most difficult part of actual mining operations is the preliminary exploration by drilling. This determines the depth to which the shafts must be sunk, and their location. Usually only one level is necessary, but the fact that the ore does not lie exactly flat makes some provision for hauling cars up and down hill necessary. This can best be done, I believe, by elec- tric haulage. This has been installed at one of the Federal plants and is very effective. Provision must also be made sometimes for secondary pumping to raise water from depressions that may reach lower than the shaft-pumping station. The stoping is very simple. No timbers are used. Round pillars of ore are left, containing 10 to 15 per cent, of the ore. It is often possible to leave pillars in the poorer parts of the de- posit by laying out the main entries so as to follow the rich ore along the fissures. Underground diamond drilling is necessary in some mines to prospect ahead for water channels. These are open fissures that carry so much water that, if broken into carelessly, they make disastrous gushes. Some shafts are pretty wet, making 1300 to 1500 gal. of water a minute. The usual output from each shaft is about 300 tons a day. This output may be greatly exceeded, however, by the use of electric haul- age so as to cover a large area from one opening. Ventilation may be secured by drilling large churn-drill holes from the surface. The most economical power equipment used in the district is at the plant of the St. Louis Smelting and Refining Company. Here a central steam plant operates a compressor and an elec- tric generating plant. The mill, hoists, and pumps are operated by electricity. Electric trams are also used to haul the ore from various shafts to the mill. The cost of mining, hoisting, and pumping is from $1 to $1.50 per ton. To this may be added 10 cents a ton for drill prospect- ing, and about 10 cents a ton for hauling the ore to the mill. 262 THE COST OF MINING The total cost of ore is, therefore, from $1.20 to $1.70 at the mill. THE PROBLEM OF MILLING THE ORES The milling 1 practice is now pretty well established. The ore is ground to 9 mm. Everything smaller than 9 mm. is screened out as soon as the ore passes the crusher. When crushed, the ore is screened to various sizes, from 9 to 2 mm., and this product jigged. The tailings from the coarser jigs are all re-ground. The material below 2 mm. is classified and treated on Wilfley tables, as are also the re-ground tailings. Middlings from the tables are also re-ground in Huntington mills and treated on Frue vanners. The cost of milling in a 1000-ton plant is from 30 to 75 cents per ton. The cost of a concentrating mill, together with a power plant for the mines, may be estimated at $500,000 for 1000 tons capacity. The new plant built by the Federal Lead Company handles about 2400 tons a day. It is built of steel and con- crete, has a large air-compressing and electric plant, and elabo- rate crushing and sampling arrangements. It cost $900,000. THE PROBLEM OF SMELTING THE ORES Smelting may be considered either on a custom or an operat- ing basis. The ore leaves the mill in the shape of a concentrate carrying 70 per cent, lead and 5 per cent, moisture. Freight to East St. Louis is about $1.50 per dry ton. This ore may be sold to custom smelters, who will pay for 90 per cent, of the lead at current quotations, and charge from $6 to $8 per ton smelting charges. On this basis, the cost of freight and treatment figures as follows : Lead, 4 Cents Lead, 5 Cents Lead, 6 Cents Freight $1.50 $1.50 $1.50 Treatment say . . 7.00 7.00 7.00 Deduction 10 per cent 140 Ifo 5.60 7.00 8.40 Total . $14.10 $15.50 $16.90 On an operating basis the cost is about $6 per ton, and the loss, with the best practice, 3 per cent.: 1 Since this was written a considerable change has occurred through the extensive use of Hancock jigs. LEAD 263 Lead, 4 Cents Lead, 5 Cents Lead, 6 Cents Freight and. treatment $750 $750 $7 50 Deductions 42 Ib. lead 1.68 2.10 252 Total $9.18 $9.60 $10.02 On average prices there would be a saving of about $5.50 per ton of concentrates in operating a smelter. But it must be remembered that the above costs could only be secured by a plant handling a considerable tonnage, say 3000 to 4000 tons a month. Let us now consider the cost of the entire operation with due regard to both capital and operating charges. In the utter lack of any official statements of the companies operating in the Flat River district I shall have to make an estimate of my own, with due apologies to the secretive persons who control the mines for rashly guessing at their secrets, and to the public for any inaccuracies. The companies operating in the district are the following: Mill Capacity Shafts Operated 1908 Dividends Not Stated Deslosre Lead Co 800 tons per day 3 $6,308,357 St. Joe Lead Co 2,700 tons per day 8 1,859,893 Doe Run Lead Co St. Louis Smelting & Refining Co. . Federal Lead Co 800 tons per day 1,500 tons per day 3,000 tons per day 4 4 6 Not stated Not stated Not stated Five companies 8,800 tons per day 25 Total output 1908 estimated at 100,000 tons pig lead. If we call this an average output and figure that the mills ran 300 days a year, we get a total of 2,640,000 tons and an average yield of less than 4 per cent. I believe that this is an overestimate for tonnage and an underestimate for yield for this particular year, but not for the long run. I shall base my calculations on the performance of this district on a yield of 4 per cent, refined lead, at a price of 4J cents per pound. I shall exclude from my calculations, as usual, the money paid for mining land on the theory that that is a part of the profit won from the industry. 264 THE COST OF MINING I shall proceed to compute the capital invested in the industry and figure the use of it as an integral part of the operating cost. CAPITAL IN EXPLORATION OF LANDS This must amount to about $2,500,000. The greater part of this has been spent by the St. Joe and Doe Run lead companies, with the Federal Lead Company (including the Central) a close third. It is probable that the ore in sight is sufficient for about seven years. CAPITAL IN SHAFTS AND MINING PLANTS This I estimate at $2,100,000, being $60,000 each for the twenty-five shafts in operation and for ten other shafts discarded or not operating. CAPITAL IN MILLING PLANTS AND POWER I estimate this at $4,400,000, being $3,400,000 for plants in use, and $1,000,000 for discarded plants, experiments, and fail- ure. Capital in transportation equipment from mines to mills, but not including railroads leading out of the district, may be estimated very roughly at $1,500,000. CAPITAL IN SMELTING PLANTS Including some capacity for smelting outside ores, this amounts to some $2,500,000, including workmen's houses, lands at plants, etc. Working capital, $2,800,000, being equal to the value of the lead output for three months. We have then: Capital in explorations $2,500,000 Capital in mining plants 2,100,000 Capital in milling plants 4,400,000 Capital in transportation plants 1,500,000 Capital in smelting plants 2,500,000 Working capital 2,800,000 Total $15,800,000 This is equal to $6 per ton of annual output. The use of this capital can hardly be calculated at less than 10 per cent, which is sufficient to return the investment in fifteen LEAD 265 years with 5 per cent, interest. This calculation does not apply to working capital, however, for that is a quick asset that can always be liquidated. As long as it is in the business, however, it must be considered worth 5 per cent. We have then for amor- tization : 10 per cent, on $13,000,000 risked in business $1,300,000 5 per cent, on 2,800,000 working capital 140,000 Total annual charge $1,440,000 This is equal to $14.40 per ton lead and 57.6 cents per ton of ore mined. The depreciation, or current construction of plants, to take care of changes in method, improvements, removals, etc., should be calculated at 6 per cent, on capital invested. This will equal $780,000, accounting for $7.80 per ton of lead and 31.2 cents per ton crude ore. We have now covered all the charges incident to the business except the current operating charges. These may be estimated as follows, giving due consideration to varying conditions: Per Ton, Crude Per Ton Concentrate Yield 65 Per Cent. Per Ton, Pig Lead Mining and hoisting $1.00 to $1.50 $25.00 to $37.50 Transfer to mills 0.05 to 0.10 1.25 to 2.50 Milling General expense Freight to St. Louis Smelting 0.30 to 0.50 0.10 to 0.20 .097 to 0.097 .378 to .378 $1.60 6.00 7.50 to 12.50 2.50 to 5.00 2.44 to 2.44 9 23 to 9 23 Total operating . . $1.925 to $2.775 $47.88 to $69 17 Add depreciation .312 to .312 7.80 to 7.80 Dividend cost Add amortization $2.237 to $3.087 .576 to .576 $55.68 to $76.97 14.40 to 14.40 $2.813 to $3.663 $70.08 to $91.37 We find that the mines can pay dividends on what remains above from 2.8 to 3.85 cts per pound, say for an average 3.3 cents. They can justify their investment at a price of from 3.5 to 4.5 cents, or in round numbers, 4 cents per pound. 266 THE COST OF MINING This I believe is a fair exhibit of the entire business. I do not pretend that the mines will not show great differences from these figures. The differences I have placed in the operating cost columns are intended to cover, for mining: the difference between a thick and a thin orebody, between dry and wet mines; in milling, the difference in the milling quality of the ores, be- tween simple and elaborate processes, and between small mills and big ones; in general expense, the difference between simple and elaborate managements. There have been failures in the district. I am striking an average of the successes. That these figures are not far from the truth may be gathered from the records of the St. Joe Lead Company, which paid more than $5,700,000 in dividends and built up its property greatly from an output of about 300,000 tons of lead. This indicates a profit of 0.95 cents per pound. Deducting this from an average price of 4.5 cents we get an average cost of 3.55 cents, less what- ever surplus may be credited from surplus in the treasury. The cost, of course, fluctuates with the times. It is always possible during periods of depression to produce more cheaply by cutting wages and curtailing construction and development; on the other hand, in boom times wages are raised and people embark in un- usual expenditures for expansion and development. As a matter of fact, lead was sold in St. Louis from the Flat River district, in the years following the panic of 1893, as low as 2.6 cents per pound without loss; but in the boom period of 1906-7 it is doubt- ful if any of the mines were producing it for less than 4 cents. CHAPTER XV SILVER-LEAD MINING Characteristics of Coeur d'Alene region The Wardner vein Detailed cost statements and records of Bunker Hill & Sullivan Mining and Con- centrating Company Summary of present operating costs Canyon Creek mines Average costs and results Smelting, refining, and marketing Relations of mines to American Smelting and Refining Company Calculation of complete mining and smelting costs, losses and profits on Bunker Hill average ore Broken Hill district in Aus- tralia Smelting costs at Broken Hill and in America Silver-Lead mines of Park City, Utah Average costs at Daly- West Daly- Judge and Silver King Smelting costs and profits. THE external factors which affect mining in the Coeur d'Alene are the most favorable of the whole Rocky Mountain region. The altitude is moderate; the climate mild; timber and water power are abundant and cheap. Transportation to consuming centers is, however, expensive, and wages are high. Labor is efficient and abundant. The mines are generally deep, meas- ured from the surface, but the configuration of the country has permitted their attack by adit levels; so that most of the ore has not needed hoisting from great depths, and pumping opera- tions have generally been inexpensive. The internal factors are favorable. The veins are typical fissures. The ore is galena, which seems to be a metasomatic replacement of pre-existing veins of iron carbonate. Ransome believes that the Burke and Revett quartzites, flaggy, evenly- bedded, light-colored rock about 3000 ft. thick, contain nearly all the payable ore, although veins are found traversing an im- mense mass of slates and quartzites of presumable Algonkian age, some over and some under the productive formations. The whole sedimentary series is estimated to have a thickness of 13,000 ft. The ore shoots are persistent and profound, with a thickness varying from 8 to 100 ft., and a length varying from 100 to 1000 ft. normal to the plunging axis. Single bodies have produced 267 268 THE COST OF MINING several million tons of ore. The ore in the main has to be con- centrated. The proportion shipped to the smelters varies from a quarter to a tenth of the amount mined. Of the proportion shipped a considerable amount is picked out by hand either under- ground or at the mill, the lower grades being concentrated. In addition to the sorting of first-class ore, there is a still larger sorting of waste in the stopes. In many cases it is necessary for safety to fill the stopes, and in all cases it is economical to reject waste. The various mines differ greatly in the amount of sorting and filling done. Several have run for years without shipping any first-class ore and without sorting any waste in the stopes, everything mined being sent to the concentrator. On the other hand, one prominent mine, the Hercules, ran sev- eral years without a mill, shipping only first-class ore. PKODUCING MINES The 'mines may conveniently be divided into two groups : the Wardner and the Canon Creek. In Wardner there is only one vein and two important mines: the Bunker Hill & Sullivan, an independent concern, and the Last Chance, owned by the Fed- eral Mining and Smelting Company. The Wardner vein has been the subject of a good deal of liti- gation, and has been well and often described, but I will hazard a new idea concerning it: The principal object of attention has always been a great mineralized fault called the "foot-wall," having a strike of north 40 west, and a dip of 45 southwest. This fault, in my judgment, originated the lead mineralization of the district, but in an indirect way. It intersects some veins whose course is more nearly east and west, or even north 70 east. These veins may originally have had only a siderite fill- ing. The Bunker Hill fault probably reopened these veins and started the lead mineralization which replaced a large part of the original siderite. The fault movements continued in part after the lead mineralization had made considerable progress, for the lead ores have been crushed into paste along the foot- wall. At any rate, at and near the footwall fissure there are a number of powerful ore channels, some of which have been fol- lowed for a distance of 3000 ft. down the slope, with very little or no change in their value or character. The mining is done almost wholly by the filling method. SILVER-LEAD MINING 269 Whether square sets are put in first and then filled, or whether the stopes are filled without timbering, depends on the firmness of the ground. This varies in different parts of the mines. In nearly all cases enough waste for the filling can be sorted out of the vein-stuff itself. The Bunker Hill mine in twenty-two years up to June 1, 1908, had produced as shown in the following tables, which are much more complete than any cost statements given elsewhere in this volume. It would be scarcely desirable to repeat often mining costs at such length in a work such as the present, but these details will undoubtedly be of interest to many students of mining problems. Accordingly I shall give not only the figures as presented in the reports of the company for 1908, but also some comments on the conditions and methods em- ployed. The first table shows the progressive history of the mine from the beginning, in various periods. In this the reader will find everything of importance relating to the ores of the mine; but for convenience I shall calculate out the avearge contents of the shipping product for the whole period and for the year 1908. 1908 22 Years Average yield per ton crude ore, lead per cent 9.8 9.68 Ounces silver, ounces 3.84 3.82 Average contents of shipping product lead per cent 43.17 51.45 Silver, ounces 16.58 20.31 It will be observed that while the yield of the crude ore per ton is almost exactly the same as for the entire period the grade of the shipping product has dropped about 15 per cent. No significance attaches to this except that in recent years a consid- erable tonnage of low-grade concentrates containing less than 10 per cent, lead and a high percentage of iron has been shipped on account of its favorable fluxing qualities. In earlier periods no such ore was shipped. Of course with the present grade of shipping ore the cost per ton will be considerably different for smelting charges than with the higher grade of past ship- ments. 270 THE COST OF MINING o W o tj Q O II r5 .. <) g o u ^ CO f 2 . lil o ^ rH>g (MOO OiCO (N 05 1C CO 00 O !> iO 00 t^. 1C O CO rHTj< 0000 CO^ COCOrHCOCOCO t-^rH (NCO cococo !> LC T-H CO r I . . (N . . 05 ic q co co 06 r-i d d d CM ic q ^ co rH rH O O O (N O5 (N rH OJ 1C t"- 1C CO >C !>; O (N (N r-J r-J d d d 1^ CO (N TtJ oi d I s * co (N CO 1C *f 1C ^ (NO O CO 1C * CM t^ CO CO 1 CM O CM CM ? CO Oi Of) IO rH OQ oo p 05 10 ^5 CM O CM rj< ^ CM 00 CO O5 O CM g CO O "tf CO O rH CM O rH TP CM CO I s * rH CO CO rH O ^ w S CO 00 CM CO O CO OO ^* H rH O 05 : : : : ^ o T3 '22 : & ' $ 'o ~o OQ as -0 T3 73 | Pflj U B-fl i!iji .g -g H !> So S COT^iOOO O CO TTI OO i-i >o 06 >od rn rh 00 00 CO^ft !>. CD C^t^rHOO <-H OO *O t^ T^ 00^ Oi^ CO (N O5 t^-" rjT t-T rH" ^O rH O OOOOrHOOrH iOiOOO^OO-^ 1 O CO CO p IO rH N iO iO O(NOirH(N(NrH ^ O CM rH GO O5 O5 rH O C5rHOOO5COCOt^-CO C5^O rH CO 10 co" i-T i>^ I-H" oT oT i-T co" co' T-H CM rH rH rH rH" TjT CMCOCOOOOI>OCM O5 *O CM rH GO ~H CM CM *O cqt^co^co^^ co >o co o CM oT CM" >o" co" rn" co" ^ CO CO CM rH rH (M Tt<00 (NO OOOO CO O5Oi iooOt^ COOi rHOO ^^ CO ^D 00 "^ (N o5 CO CM* Oi a .3 I I 272 THE COST OF MINING SILVER-LEAD MINING 273 The following table shows the stoping cost in detail. Nearly all the ore comes from large tabular masses having a dip of only 30 from the horizontal. In some places the hanging wall is loose. Most of the ore is mined in square-set rooms that are filled with waste, either sorted from the orebody or obtained from development work, almost as fast as the ore is mined. Under these conditions it will be plain to any mining man that the costs are low. The statements are for the year ending May 31, 1908. "Stoping. The mine was in operation for the full period of one year, and produced 330,730 tons of concentrating ore, at a cost of $511,288.16, as follows: Details for Labor and Supplies Total for the Year Average per Ton for the Year Highest Cost per Ton for One Month during the Year Lowest Cost per Ton for One Month during the Year Foremen, bosses, blacksmiths, machinists, tool -packers, etc. Timberman and carpenters Miners $60,982.27 25,109.38 125 148 48 .185 .076 379 .191 .082 400 .165 .063 .339 Carmen 15 918 00 048 042 058 Shovelers Power labor . . 133,176.50 7 708 40 .403 023 .450 .027 .379 .021 Repair labor 7 492 70 023 025 021 Explosives 30 019.37 .091 .111 .087 Illuminants 7 482 08 023 026 .017 Lubricants 1 329 87 004 004 006 Iron and steel 4,158.20 .013 .014 .012 Miscellaneous supplies Timber and lagging 11,667.61 61 629 00 .035 186 .032 .199 .025 .165 Power supplies 7 876 30 024 024 027 Wood 9 292 80 028 030 030 Stable and stock 2,297.20 .007 .007 .006 Total 511,288.16 1.548 1.664 1.421 Nov. May" The stoping of shipping ore simply represents the sorting out of a variable amount of high-grade galena to be shipped direct to the smelters, thus avoiding the losses in the concentrating mill. It will be observed that this sorting adds something to 274 THE COST OF MINING the cost. On this ore the cost of concentrating and mill losses are avoided altogether so that this is the most profitable product of the mine. "Shipping Ore. The mine also produced 4340 tons of crude shipping ore, at a cost of $8,445.27, as follows: Highest Lowest Details of Labor and Supplies Total for the Year Average per Ton for the Cost per Ton for One Month Cost per Ton for One Month during during the Year the Year Foremen, bosses, blacksmiths, ma- chinists, tool-packers, etc .... $1,468.04 .338 .242 .200 Timbermen and carpenters 255.20 .059 .071 .027 Miners 1 808 25 416 503 338 Carmen 260.00 .060 .073 056 Shovelers 2 808 04 647 973 575 Power labor 80.10 .018 .036 .011 Repair labor. 102.70 .024 .030 .021 Explosives 330.50 .076 .153 .055 Illuminants 96.98 .022 .024 .026 Lubricants 11.05 .003 .008 .001 Iron and steel 51.30 .012 .018 .015 Miscellaneous supplies 171 81 040 .039 032 Timber and lagging 847.10 .195 .290 .136 Power supplies 75.30 .017 .045 .017 Wood 7890 018 041 026 Total $8 445 27 1 945 2 546 1 536 May April " Making the total ore mined 335,070 tons, at a total cost of $519,733.43." Tramming in this case represents the cost of taking the ore out through a two-mile tunnel and dumping it into the mill bins. " Tramming. The electric railroad was in operation for the full period of one year, during which time it delivered to the concentrator 335,070 tons of ore, at a cost of $27,640.76, as follows: SILVER-LEAD MINING 275 Highest Lowest Average Cost per Ton Cost per Ton Details of Labor and Supplies Total for the Year for One for One Month Month during during the Year the Year General labor . . $1 200 00 .003 003 004 Trammers 11 062 05 033 030 036 Power labor 2,773.37 .008 008 010 Repair labor 4,248 75 013 020 007 Illuminants 30000 001 001 001 Lubricants 470.00 .001 .001 .001' Iron and steel 32000 001 003 Miscellaneous supplies 1 340 00 004 005 003 Power supplies 4,060.59 .012 013 010 Wood 1,866.00 .006 .011 Total $27 640 76 082 095 079 Feb. June " During the above period of one year the railroad was in opera- tion, 732 shifts of eight hours, of which 42 shifts were lost, as follows : 24 shifts on account of Sunday lay-off. 4 shifts on account of July 4th. 4 shifts on account of miner's picnic. 2 shifts on account of Thanksgiving Day. 2 shifts on account of Christmas. 2 shifts on account of mill shut-down. 4 shifts on account of cold weather, stopping operations. " Besides the above ore there were trammed 20,800 tons of waste, making the average work of the railroad 486 tons per shift, or 515 tons per shift of actual operation, at a cost per ton of ore and waste handled of $.078. This cost includes hauling of timbers and other supplies and the taking of the larger per- centage of the men to and from their work." Concentrating at this mine represents the rejection of gangue to the extent of 80 per cent, of the crude ore. The process con- sists of rather coarse crushing, jigging, and the treatment of a considerable proportion of fines on vanners and Wilfley tables. The cost has been increasing of late years, owing to refinements in the process, i.e., it has been found desirable to spend more 276 THE COST OF MINING money in the mill to make a higher saving. The cost has gone up as follows : 1905 18 cents 1906 18.5 cents 1907 24.4 cents 1908 37.2 cents These costs are for operating alone. It is evident that this increase of cost will be justified by the saving of an additional 6 or 7 Ib. of lead per ton milled. I imagine the results are far better than that. 11 Concentration. The concentrator was in operation for the full period of one year. Of the 366 days there were lost 30^f days, as follows: 150 hours on account of screens, elevators, and rolls. 55 hours on account of belts and Huntington mills. 34 hours on account of general repairs. 72 hours on account of holiday lay-offs. 218 hours on account of Sunday lay-offs. 48 hours on account of miner's picnic. 30 hours on account of electric power off. 50 hours on account of slush ice. 11 hours on account of pulleys, pumps and jigs. 16 hours on account of short of ore. 9 hours on account of repairs to tail race. 27 hours on account of short of water. 10 hours on account of broken line shaft. "In the above period 330,930 tons of ore were concentrated, making the average work of the concentrator 904 tons per day, or say, 986 tons per 24 hours of actual operation. SILVER-LEAD MINING 277 Detail of Labor and Supplies Total for the Year Average per Ton for the Year Highest Cost per Ton for One Month during the Year Lowest Cost per Ton for One Month during the Year General labor $15 226.58 .046 .067 .034 Millmen . 46,129.07 .139 .150 .127 Laborers 2,603.48 .008 .008 .004 Power labor 2,866.46 .008 .007 .005 Crusher labor . 1,520.04 .005 .007 .004 Repair labor . . . 3,688.58 .011 .013 .011 Illuminants 1 475.50 .005 004 004 Lubricants 1,730.00 .005 .005 .005 Iron and steel . . . 930.00 .003 .002 003 Miscellaneous supplies 23 184 79 070 082 064 Lumber 1,370.00 .004 .008 .005 Roll shells Trommel screens 1,685.00 1,336 00 .005 .004 .005 003 .007 003 Crusher supplies 1 900 00 008 008 005 Wood 13,310.80 .040 044 028 Power supplies 4 205 00 .013 007 023 Total $123,161.30 .372 420 332 Oct. April "Shipping Expense. We shipped 72,468.80 tons of concen- trates and middling ore and 4304.30 tons of crude ore, or a total of 76,773.10 tons, at the following expense: Total Cost per Ton General labor $1 110 00 $014 Laborers 3 256 09 042 Contractors ... 10418 86 137 Illuminants . . 12060 001 Miscellaneous 284 35 004 Representative at smelter 14607 002 Total $15,335.97 .200 " Superintendence and Office Expenses. Superintendence and Office expense amounted to $28,726.03, as follows: 278 THE COST OF MINING Superintendence and surveying $16,440.00 Bookkeeping and assaying 6,562.57 Wood and illuminants 910.00 Office supplies 1,087.47 Assay supplies 1,310.00 Telegrams and telephone expense 523.51 Sundries 1,892.48 Total $28,726.03 11 Legal Services. Legal services amounted to $3000, being the salary of the company's local attorney. "Contingent Expense. Contingent expense amounted to $13,422.54 as follows: "This completes the list of direct operating charges at the mine, but it does not end the expenditures of the company. We must add the following: "All other Wardner Expenditures, aside from warehouse accounts, were, Improvements $109,272.08 Taxes 59,646.98 Insurance 3,853.84 Real estate 9,716.00 Dividend reserve 2,069.58 Sale of electric light 10,735.13 Sale of water 823.82 Purchase of mining property 8,970.70 Mine office fixtures 486.20 Litigation 13,676.64 Exploration 44,362.18 $263,613.15 Less certain local receipts at Wardner and San Francisco 37,226.02 $226,387.13 " To these expenses must be added for freight and treatment on ore shipped to the smelters $1,004,896, equal to $3 per ton mined and $13.09 per ton shipped. From the value of the ore so shipped a deduction was made for assumed losses of $333,092, equal to $1 per ton mined and $4.35 per ton shipped. "Exploration. Details for 1908 and ore reserves 4846 feet of drifts, crosscuts, raises and winzes were driven, at a cost of $44,362.18, as follows: SILVER-LEAD MINING 279 Highest Lowest Average Cost per Foot Cost per Foot Details for Labor and Supplies Total for the Year per Foot for the for One Month for One Month Year during during the Year the Year Foremen, bosses, blacksmiths, ma- chinists, tool-packers, etc . . . $2,639.66 .545 .776 .324 Timbermen and carpenters 180.75 .037 .128 Miners . 6,568.00 1.355 1.718 .527 Shovelers 9 685.87 1.999 2.730 1.195 Contractors 5,107.50 1.054 .994 1.424 Power labor . 2,511.50 .518 .537 .458 Repair labor 504.60 .104 .129 .078 Explosives 7,516.50 1.551 1.847 1.166 Illuminants 515.94 .106 .166 .078 Lubricants . 284.08 .059 .067 .057 Iron and steel 29050 .060 .092 .026 Miscellaneous supplies 2,168.48 .447 .423 .104 Timber and lagging 1,762.10 .364 .369 .144 Power supplies 2 348 40 .485 .739 .401 Wood 2,278.30 .470 .696 .200 Total $44 362.18 9.154 11 411 6.182 Feb. June "The above development has given to the property a tonnage of standing ore ready for extraction never before equaled in amount or grade during the many years of operation of the mines. The most valuable and extensive developments were made on No. 10 and No. 11 levels, in the Bunker Hill mine, these levels being 200 and 400 ft., respectively, below the No. 9, or Kellogg tunnel, level and the deepest levels in the district. Orebodies were also opened in the Tyler No. 8 level, in the Stemwinder mine, and the Vann Intermediate, in the Sullivan mine. Sink- ing of the shaft from the Kellogg Tunnel level has been accom- plished, and at the present date (September, 1908) has reached a depth of 600 ft. vertically below the Kellogg Tunnel, where the No. 12 level is to be established and crosscutting for the orebody started. This should be completed early in 1909." "Ore Reserves. We have ore reserves partially blocked, of date Oct. 12, 1908, as follows: 280 THE COST OF MINING Stemwinder mine 60,856 tons Sullivan mine 903,247 tons Bunker Hill mine 1,845,575 tons Total 2,809,678 tons" We may summarize the whole operation as follows: Cost Per Ton Mined 335,070 tons Per Ton W Stoping $519,773.43 $1.551 $6.77 Tramming 27,640.76 .082 .36 Concentrating Shipping 123,161.30 15,335.97 .372 .200 1.60 20 Superintendence Legal services 28,726.03 3,000.00 .085 .009 .37 04 Contingent expense 13,422.54 .040 .18 Construction, taxes, insurance, explo- ration 226,387.13 676 294 Total mining and milling . . $957,447.16 $3 015 $12 47 Add smelting 3.000 1303 Total costs $6 015 $25 56 COST PER POUND LEAD The number of pounds lead realized may be computed at 227, and the cost per pound 2.65 cents. I get this by taking the number of pounds lead realized per crude ton, 196, and adding thereto the value of 3.84 oz. silver in lead at the proportionate prices for the year; equaling 57.6 lb.; making a total of 253.6 lb., less 10.3 per cent, deducted for loss, leaving a total of 227 lb. The prices received for lead were 0.18 cents per pound less than the New York market prices, but as this deduction did not apply on the silver the total loss on this account may be calculated at only 0.13 cents per pound of lead equivalent. Adding this to the 2.65 reached above, we get 2.78 cents as the real cost of lead to the mining company. Of course this includes the profit made by the smelting company on these ores. What that profit is, there is no means of calculating; but it does not seem improbable that whatever profit is made in smelting would represent only a fair amortization of the capital required. We shall not be far SILVER-LEAD MINING 281 wrong if we take a round figure of $2.75 cents as the real cost of lead from this mine for the year. AVERAGE RESULTS The total cost of operating this mine has been in summary: Current operating expense per crude ton $2.665 Creating plant 800 Total $3.465 Thus the amortization and depreciation charges equal just 30 per cent, of the current operating charges. CANYON CREEK The Canyon Creek mines differ from the Wardner mines only in the shape of the orebodies. The dip is not far from ver- tical; the ore shoots are much longer, thinner, and more regular. Wages average 46 cents an hour, 4 cents higher than in Ward- ner. Details of cost are not given. The Federal Mining and Smelting Company for three years reported as follows: OPERATIONS OF THE FEDERAL MINING AND SMELTING COMPANY FOR THE LAST THREE YEARS Total tons mined and milled 2,428,112 Tons lead in shipping product 166,912 Ounces silver in shipping product 10,300,049 Percentage lead 6.87 Ounces silver per ton 4.24 Value of product $24,310,441 Smelting, refining, and deductions 10,514,773 Net value to mining company 13,795.668 Profits reported 6,160,247 Total cost 7,635,421 Cost per ton, mining and milling crude ores 3.14 Cost per ton, concentrates shipped 22.03 Smelting, refining, and marketing concentrates 30.35 It will be seen that these figures indicate conditions similar to those of Wardner. Further elaboration of detail seems unnecessary. The costs are higher than at the Bunker Hill, but the difference at the mine is to be explained by the factors, (1) higher wages, (2) a greater amount of hoisting and pumping, 282 THE COST OF MINING (3) a charge for railroad transportation from mines to mills, (4) a greater 'number of power and mining plants to maintain, and a higher power cost. In each case these factors are inherent to the problem and cannot be removed. The cost of mining and milling, of construction, of freight and treatment; and the value of the ore to the mines, free from smelter deductions for a period of five years during which the average price of lead in New York was 4.6 cents and of silver 59.2 cents, are given for a number of properties in accompanying tables: . S. GEOLOOIC4L ROFES8IONA.L PAPER. NO. 62 PL. XXVH ,'MAP SHOWING PLAN OF DEVELOPMENT OF STANDARD-MAMMOTH MINE. From tfie company's surveys. Top -is north. FIG. 17. SILVER-LEAD MINING 283 COST AND VALUE OF ORE PER TON AT Six MINES FOR FIVE YEARS (NEW YORK PRICES: LEAD, 4.6c; SILVER, 59.2c.) M tt o sl a i Tons 'S3 1 ed g ^ 1C CO rH CO ^ CM CM 00 rH 00 I> rj< CO 00 CM t^ CO I rH Tf CO *O oo" oT r-T cT o" r-T -nT rH CO CM O O CM CM CM 1>OOO rHOOCM-" H S co" IO~ T)^ r-T CO" r-T o" CO" ^ ^^^ CMOOOOO *"" 1 o I i-H CO CO CO "^ T H ^H CM 10 rH O CM CM ^ o Oscol>'O| l OOOCO^O^ LD S ^T i>" co" CM" co" rn" CM" '" ^ O rH rH GO CO H I - - - hCOcO'* OSCMOCM O OQiO'- L C' i OI>" Q ------ I - oo" rn" CO" rH .0 ^ ^i o I CMrHOO OOOSCOCM "o O c CM "* O5COOOO5 p <=> |COCOIO|COCMCM1> ~Q 2 ^SBrH 7 S"S?5^ CO O CO CO CM -^ rH OS t** 00 CO CM CO *O 00 CM O I CO 00 I> !> oo o "o" I s -" ^ CM CM 00 CO CM CM OS CM rH i CM CO O l> 1 00" CO" O" rH" CM rH rH .2 S o ,2 e 2 -& A r-, C3 -M ro 111 -Q ^2 o o .g a al a o o H H il 310 THE COST OF MINING B 8 W o 5 " t"* o g g a N ^ M fe ' o I T3B I>OOO(MOr>--*' i- iCMGO 6 OOOtoO LO Tfl CM O O LO CO -*tl IO rH CO o os oc co to co b- os -f oo "tf 8" co" co" co" CM 1> CO CO O O OS OrPOOOsOOcOrH TflrHTtlOOrHCOrHlO CM LO CM CM 00 OO to rn" co" T-H" r-T to O O iO TF t^ rH CO rH O O 00 00 * t- co co O ^ 8 O LO rH SSSSEggg ^ llil " cT co" CO SLO rH rH rH CO O CO CO OS 00 rH rH O CM - - - o o co OS OS oo co t^ oo" ' TH os CM^ CO^ rH_ OS^ t^ 00^ CO^ 00^ i>" LO" t^T -HH" co" oo" co" r-T CO CO CO LO rH IO c| b- 06^ to r-T co" r-T i-T rH 1> CM ?J rH !>. CO CO OS ^ CM CO TP 00 CO O O OS OS 00 00 CM OS rfH l> I-H" I-H" CM" 1 rn" co" rH O 82 iO CM rH 1>- CO CO O rH rJH CO TF CO rH rH t^ CM OS OS CM 00 rH ^ O OS iO CM OS to CM rHl>CMOSLOOSTtlCM CO LO rH iO CO 00 CM O CM CO 88 rHCMl^.rHOCMCOrH CMCMrHCOCMrHLOO CO *-O ^^ ^^ 00 CO !> O^ O CO 1> ^ CO CM 8 CM Tt< OS CO LO oo" rng TflO^t^OOLOOOrH LOOSOS-^OOCOCMCO l> rH CM CO I> l> 00 OS OS 288 to c 00 " CO rH CM" co" T-H" co' COLOCOCOOOI^OOI^OOOO rHCOOST}H|>OOOOTtH-HHCO 1 rH CO CM r rH" CO" i-T LO OS 00 rH CM CO CO CM r^OrfHOcOCMCMCMrfHrHCMCM CMOOC N ) T fOSCMCOrHOSOtoCM rt^ CO O LO l>* Os l^- rH 00 CO CO to Tfi OS 00 rH CO O rH !> CO i " ^ S Ame United * ? i :| 1 ^ -Sf s 3 Q H, ^ "-S 1 : S : ^ 3 *rt erica, c8 e 43 g; ^ I|J oT "5 g Q of cf J3 p*^ 2 s 5sg;^o| Soo.g^^'BgSlS O^^o <1fqpQooW nad wfo Gu Gu l O PH Urug Vene Sc3 - S) y ny II OCCURRENCE AND PRODUCTION OF GOLD 335 COlOl^rHrHCOtOOO 1>.COCMCOOOCOCO CMrHOOlOCMCOrHOS Tt< CO * OS rH ** co o 10 S O 00 >o CO CO OS CO CO t~- rH t>. rH^ CM_ 00 l> -H" CM" to" iO~ lOCOTtHCMOtOCMOtO CO^rH^CM^^CMCMCOtOtO r-i to" CM" o" co" CM" CM" <-T OS 00 rH oo co CM 00 OS 00 rH 00 CM 00 rn" oo" Os" 00" t I rH CM 00 00 OS 00 t>- 1> "* 1> CO O CM O O CO O tO ^ I"- O CM O CO 1^ rH O O CM CM "tf CO CO to" "^" ^" oT >O OS to t tO O CM to 00 to tO O rH < rH CM CO OO 00 to t^ O CM 00 O b- Tt^ CO^ t^ OS^ rH OO CO CM rH IO OS CO * "* 00 CM ^ CO oo O rH CO O tO OS <* to O t^ CM -^ CO CM -^ rH CO 00 rn" o" CO" CM" to" ^^ CO OS rH 00 <*! 00 to ^t< CO CO OS O rfi rn" 10" O" 00" OS rH t>- CO O CO CM" co" CM" >o" to" co" CM !> CO iO rH CM 00 10 CM ^1 CO CM CO CO CM rH Tfl t^ rH OS 00 t^ O !> CO CM "^" CM" r-T CM" tO rH CO t>- tO ^ CM CO to CO CO CD iO CO OS t^ CO O !> OS to ^ to to rH 1> OS CO O rH CM "tf rH rH OS CM to CO IO CO O rH CO ^ CM O t^ to OS OS OS t^ OS CM CO "tf O CM rH CO CO rH r-T os" os" ^" c/c Th CM 00 CM O 00 tO to 't 1 OO to to CM 00 !> CM CO CO rn" o" CM" CM" CM" rH 00 CM 00 rH CM 00 O OS rH CM t^ CM OS CM r-T TjT oT co" rH 00 CO IO >O t^- !> 00 "* CO CO CM co" rn" co" co O rH 00 CO CO CO OS OS CO ^f iO CM "ti 00 OS CM O CM CO CM iO to t^ CM 00 rH rH CO O rH CO TjH tO to GO OS Tf 1> rH o *o" OS t^* OS ^ CO 00 O OS CM t^* CO CO CO t^ tO CM O CO rfi CM CO rH rH 00 tO rH rH OS I! jl :& .^liill ^ G ^ o3 43 HP S P4 ish B c) ire a a o II Bo S S ' I J cS .sf i S 5* 1 s 12 & s ^ S^ ^ ^ WS - O 8 1 I 2 .2 fl -g s I m != 8 ^ ^f^" o ^ ^ I i I 1 I ? 1 '3 ^ I ^ I o i Est 336 THE COST OF MINING COST OF PRODUCING GOLD PER OUNCE It is to be remembered that fine gold is worth $20.67 per ounce. In order to gain some idea of the proportion of profit in gold mining as compared with other metals we may conveniently take the cost per ounce as an index. It is a current statement that gold costs more than it is worth. If one were to charge up against it the fruitless explorations and unprofitable enter- prises of which it is the object it is impossible to conjecture how near true this statement might prove to be. Very likely those responsible for the statement and who believe it have never gone beyond the point of making a guess. In my judgment the state- ment is not any more true with reference to gold than with any other metal. Just as the selling price of copper is determined in the main by the costs obtained by the successful enterprises which are responsible for the major portion of the output, so the value of gold is established by the correspondingly success- ful properties and districts which yield the greater part of it. In the Transvaal the proportion of total yield of gold that has been paid in dividends is almost exactly 25 per cent. The cost of gold, therefore, in this district which is yielding one-third of the world's output has been to date three-quarters of $20.67, or about $15.50 an ounce. This proportion is holding good at present, the record for the year 1908 showing dividends equal to 28 per cent, of the gross value produced, indicating a cost per ounce of about $14.85. We might compare the record of the Robinson, at present the world's most profitable gold mine, against the Calumet & Hecla, the world's most profitable copper mine. The compari- son is approximately as follows: The Calumet & Hecla: gross value of yield about $312,000,000; dividends $108,500,000, which is 35 per cent. The Robinson mine: gross value of yield $60,000,000; divi- dends $32,000,000, equal to 54 per cent. In Cripple Creek, Colorado, I estimate the cost of gold to have averaged about $17 per oz. or 82 per cent, of its value, while the principal mine the Portland has secured gold at a cost of $14.50 per oz. or 70 per cent, of its value. In Kalgoorlie, West Australia, I have no figures for the dis- trict at large, but seven or eight of the leading mines have paid OCCURRENCE AND PRODUCTION OF GOLD 337 dividends equal to approximately 40 per cent, of the yield in gold, so that the cost per ounce is only $12.40. These mines have furnished so large a proportion of the total yield of that district that it seems safe to conclude that the cost of the entire yield has not exceeded $15 per oz. In the Kolar district of India, the four leading mines respon- sible for nearly all the output paid dividends equal to 44 per cent, of the gross value. Hence we conclude that the cost of gold has not exceeded $12 for those mines, and probably not over $14 for the entire district. At El Oro, Mexico, the record of the three leading mines shows profits of 40 per cent., indicating cost of gold of only $12 per oz. It is not at all probable that the fruitless prospecting in that district would bring the total cost up to more than $14. While it is not probable that such favorable showings for gold- mining districts can be extended to cover the whole list of dis- tricts, it is evident that the successful gold mines are fully as profitable as successful copper mines. The value of gold pro- duced in the world is almost twice the value of the copper pro- duction, so that I feel warranted in saying that the current belief that copper mining is the most profitable form of mining enter- prise, and that gold mining is one of the least profitable, is far from justified. It is to be remarked, however, that in the United States copper is a more important product than gold and it is in the hands of a smaller number of much larger concerns, which have paid larger dividends than any individual gold mine. In the world at large the reverse is true. CHAPTER XIX QUARTZ-PYRITE GOLD MINES Treadwell group in Alaska Exhibit of conditions and costs Home- stake San Juan region in Colorado Camp Bird Liberty Bell El Oro district in Mexico Esperanza and El Oro mines Kolar district in Mysore, India Details of cost factors Records of the mines A question of bookkeeping Witwatersrand Average re- sults The Robinson mine Generalizations on the price of labor and costs. INCLUDED in the class of quartz-pyrite mines are all of the properties of the Witwatersrand in the Transvaal, in fact all the gold mines of South Africa, nearly all the mines in eastern Aus- tralia, those of the Kolar district in India, of El Oro in Mexico, of California, Nevada, and Douglas Island, Alaska. In general, these ores are a light-colored or whitish quartz containing from 0.25 to 10 per cent, of iron pyrite and other sulphides in varying but usually subsidiary amounts. The quartz and pyrite may fill open fissures, or they may be replacements of country rock, or the cementing material of beds of conglomerate. Deposits of this kind have proved to be extensive, often persistent to great depths, and are worked on a grand scale. TREADWELL GROUP The group of mines on Douglas Island, Alaska, known as the Treadwell, Mexican, and Ready Bullion, furnish ore for 780 stamps at the rate of 1,200,000 tons a year. This work with good reason stands at the head of the list of quartz-pyrite opera- tions, furnishing an example of the simplest metallurgical prob- lem, the lowest costs, and, I believe, the best management to be found in this class of mining. The external and internal factors which affect the results obtained are of great interest to the student of mine economics. Robert Kinzie, now superintendent of all the mines, pub- lished in Trans., A. I. M. E., Vol. XXXIV, a detailed account of 338 QUARTZ-PYRITE GOLD MINES 339 340 THE COST OF MINING these properties up to 1902; in addition to this we have the full and excellent reports issued by the companies. On the whole the information available is definite and satisfactory. Along a great porphyry dike which cuts the black slate of Douglas Island, there are three or four large lenses or ore shoots where the dike has been profoundly altered and silicified by the action of magmatic waters. The largest and most northerly of these is the Treadwell orebody, which was 400 ft. wide and 1000 ft. long at the surface. The Mexican and Ready Bullion ore- bodies are approximately 20 ft. thick and from 500 to 1000 ft. long in horizontal section. These orebodies are situated within a stone's throw of a splendid harbor on a sheltered waterway, which extends for 1000 miles from Puget Sound to Skagway. The most convenient and cheapest transportation facilities are thus provided for coal, timber, and other supplies. Concentrates, in the shape of auriferous iron pyrite, are shipped 800 miles to the Tacoma smelter at a cost of $1.72 per ton. The climate, though rainy, is mild and pleasant, corresponding to that of Scotland or southern Norway. While wages are not low, accord- ing to some standards (averaging about 32 cents per hour in actual cost), I believe that labor, owing to its efficiency, is really cheap. In addition to these advantages an abundance of water power is available. Little pumping is necessary in the mines. These external factors are so favorable as to be quite exceptional, per- haps unrivaled. INTERNAL FACTORS The internal factors are also exceptional. The orebodies are large and firm; standing nearly vertical between pretty solid walls, they came up under the glacial drift in large masses that could be attacked in open pits. The metallurgical problem is the simplest. Mining these orebodies, therefore, presented to the manage- ment the following factors: Several million tons of ore favorably situated for cheap handling, but containing less than $3 per ton. To make the maximum profit, or to make profits at all, required cheap methods both of mining and milling. These conditions as to mining were met at the beginning by the "milling" method in an open pit; and as to treatment by the adoption of a large, simple, water-actuated stamp mill in QUARTZ-PYRITE GOLD MINES 341 which ore could be amalgamated and concentrated in wholesale quantities and at minimum cost. The simple metallurgical treatment proved amply effective, for the ore is thus treated at a cost of 17 to 27 cents a ton with an apparent extraction of 90 per cent. As the mining proceeded it became increasingly difficult and finally impossible to maintain the required output from open pits and it became again imperative to devise a method of min- ing, this time underground, that would be cheap enough. It was a broader problem than the first because it involved the ques- tion of how much ore could be sacrificed on the one hand and how cheap the mining could be done on the other. It was dis- covered that about 75 per cent, of the ore could be mined without timbers from large chambers kept full of broken ore, only enough being drawn off at the bottom to afford room for the miners at the top. In the widest deposit this process costs $1 per ton and in the narrower bodies $1.20 per ton. No change being required in milling methods on account of increasing depth the inauguration of the method of mining described seems to have solved the problem of making these ore- bodies pay to an indefinite depth as long as they maintain any- thing like their present size and value. The milling of the Treadwell ores, its results, the collection and shipment of concentrates, are all shown up to 1902 in the accompanying tables given by Mr. Kinzie. It is well to note that in each of the mines the value recovered is about equally divided between free gold saved by amalgamation, and aurifer- ous pyrite which constitutes 2 per cent, or less of the original ore. The shipment and treatment of these concentrates costs about $6.75 a ton and when spread over the original ore milled costs from 10 to 14 cents a ton. 342 THE COST OF MINING a s 2 O H S o & 5 8 5 o 2 3 ^ o 55 * g OO C5O5 eo iCCOCOC^iOCOCO CV) (M ( ^H d dddddddd 344 THE COST OF MINING The actual results and average costs up to the end of the reports for 1907 for the various mines are as follows: Treadwell Mexican Ready Bullion Tons milled 8,485,085 2,447,063 1,841,079 Tons in sight . . . .... 4,982,883 794,924 1,378 651 Feet development work 14 years 74 717 59960 27362 Tons developed per foot approximate . . . Total value recovered per ton Profits, operating, per ton 120 $2.44 1.16 54 $2.55 0.77 100 $1.89 0.25 Total operating cost per ton Last depreciation figures per ton Total estimated cost 1.28 0.21 1.49 1.78 0.23 2.01 1.64 0.35 1.99 From the above it appears that the Treadwell and Mexican mines have been very profitable, but that the Ready Bullion has not as yet earned enough to justify the investment, but the improvement in grade at the bottom is such as to be very promis- ing for the future. It further appears that the combined mines have treated 12,773,227 tons of quartz worth $30,446,947 or $2.38 per ton for a total operating cost of $1.43 per ton, to which is to be added 24 cents a ton as a fair estimate (it seems very lib- eral) of the value of the plants employed; the total to be esti- mated for cost being $1.67 per ton and the profit 71 cents or 30 per cent, of the gross value recovered. Below are given, more in detail, the costs of these remark- able mines, for the Treadwell in the year ending May 31, 1907, and for the Mexican and Ready Bullion for the calendar year 1907, the ore all coming from underground stopes except 12 per cent, of the Treadwell ore which came from an open pit. In each case the costs, while not the lowest on record, are quite near the average. I believe in the case of the Treadwell that the costs are overstated, certain sums being credited to the receipts which might logically be deducted from the costs, but I have made no attempt to change the figures given. QUARTZ-PYRITE GOLD MINES 345 Treadwell Mexican Ready Bullion Tons milled 702,953 214,263 213,370 Cost mining and development Milliner $1.00 17 $1.19 0.27 $1.00 36 Shipping and smelting concentrates .... General expense Construction 0.12 0.04 0.04 0.12 0.09 0.01 0.11 0.07 001 Total operating Depreciation . . $1.37 0.21 $1.68 0.23 $1.55 035 Grand total $1.58 $1.91 $1.90 HOMESTAKE From the Treadwell group one naturally turns to the Home- stake mine in the Black Hills, South Dakota, to make compari- sons. This is the greatest gold mine in the world in point both of tonnage and of gross value produced. In eight years out of the last nine the output has been as follows: Tons milled 9,383,114 Gold recovered $34,638,518 Cost 28,587,300 Profit , 6,051,218 Per Ton $3.69 3.04 0.65 It is to be observed that the costs are nearly twice as high as at the Treadwell group. Why the difference should be so great does not appear. One is tempted to suspect that the management may have had something to do with it, although nothing is more dangerous than to jump at such a conclusion. The external conditions are not so favorable as at Douglas Island. The wages are about the same, but there is not such a good supply of water and timber, and transportation is more costly. The cost of water alone is approximately 10 cents a ton at the Homestake. The internal factors would appear to be about the same. A vast body of silicified slate has been followed from the surface to a depth of nearly 1600 ft. The thickness is several hundred feet. The metallurgical problem seems to be simple; 4.7 tons are crushed per stamp per day. Amalgamation is followed by cyaniding the tailings at the very moderate cost of 18 cents per ton stamped. 346 THE COST OF MINING The finer slimes receive a further treatment not described in the reports. There are 1000 stamps employed on Homestake ore in six different mills. The whole milling process in 1907 cost as fol- lows per ton : Milling and amalgamating 44c. Cyaniding 18c. Slime treatment and construction 24c. Total 86c. The recent cost for mining and development is $2 a ton. For mining at the rate of 4000 tons a day from a single orebody this seems high. Possibly the methods are too good; a more wasteful one might be more profitable. Assuming that with the methods that have been used the profit now averages 75 cents a ton, it is demonstrable that the adoption of a method that would reduce the mining cost from $2 to $1.25 per ton at a sacrifice of 25 per cent, of the ore now saved would increase the value of the mine 60 per cent. If on the present basis 20,000,000 tons would be mined in fifteen years at a profit of $15,000,000, the present value, figuring interest on deferred payments at 4 per cent., would be $11,111,000. On the other basis, 15,000,000 tons mined in eleven years at a profit of $22,500,000 would give a present value of $17,700,000. MINES OF THE SAN JUAN REGION, COLORADO The external conditions at the Camp Bird property are unfa- vorable. The altitude of the mine is 11,200 ft. in steep and snowy mountains. Two years ago a snow slide destroyed the mill and delayed operations six months. Wages are about average for the Rocky Mountain region, but it is not to be supposed that men are capable of sustaining their best exertions at such an altitude. Supplies have to be hauled several miles from the railroad station, Ouray, over a steep mountain road often blocked with snow. The internal factors are as follows: The ore occurs in exten- sive shoots in a nearly vertical quartz vein 3 to 10 ft. thick, in a horizontal formation of bedded porphyries. In a total length of 4500 ft. explored there are four ore shoots aggregating 1700 ft. long. This has involved an expense for development of 76 cents a ton. QUARTZ-PYRITE GOLD MINES 347 Stoping is done as at the Treadwell by breaking the whole vein upward from the levels and drawing out only enough to make room for the miners. Up to April, 1907, about 489,000 tons had been taken out and milled; 112,000 tons remained broken in the stopes. CAMP BIRD MINE FOR THE YEAR ENDING APRIL 30, 1908 Blocking out ore $0.64 Ore breaking 60 Timbering 69 Loading and tramming 78 Hoisting 18 Lighting and pumping 15 Engineering, sampling, and assaying 10 Foremen and bosses 17 Power 32 Maintenance 44 Total mining, 78,966 tons 4.08 Transportation to mill 28 Stamp milling 80,087 tons 1.19 Cyaniding 61 Shipping and selling concentrates 1.42 General expense, consulting engineer, administration, taxes, etc 1 .50 Depreciation average five years 78 Survey of unpatented claims 06 London office expense 35 Total cost per ton $10.27 Total values recovered were $25.90 per ton; of these 74.76 per cent, was obtained by amalgamation; 16.02 per cent, by con- centration, and 9.22 per cent, by cyaniding. The extraction of the gold is given at 93.84 per cent. Adopting this as a rough estimate or the total extraction of all metals, we get $27.60 as the orginal value of the ore, so that the mill losses are approxi- mately $1.70 per ton. It is interesting to compare this record with that of the Mysore mine in India, which extracts a somewhat lower grade of ore without any expense for the treatment of concentrates, and mined ore during the same year at a cost of $9.25 a ton, although the wages at the Mysore mine seem to have averaged only 36 cents a day. The number of men employed at the Camp Bird is approximately 300 for an output of 80,000 tons, while at the Mysore 8334 are employed for an output of 234,000 tons. It appears that the operations for the year given above were cheaper than for former years, an explanation being found in the 348 THE COST OF MINING fact that some 17,000 tons of ore were withdrawn from the stopes more than were broken in the stopes, and because the tonnage treated during the year was greater than ever before without any increase in the amount of general expense. During the past three years 184,605 tons were treated, averaging $28.90 per ton, and the earnings were $16 a ton, leaving $12.90 as the actual cost. It is stated that the extraction reported for 1908 was the high- est on record. If we assume that the extraction has averaged 92 per cent, the performance of the mine may be calculated as follows : Assay value of ore $31.40 Loss in milling 2.50 Yield 28.90 Total operating costs, including construction, develop- ment, and London expenses 12.90 Total costs and losses 15.40 Profit per ton 16.00 Percentage of profit 51.00 These costs are much higher than those of the Liberty Bell mine a few miles away. The reason undoubtedly is the higher grade of the Camp Bird ores; this accounts for higher costs in taxes, freight, and treatment, etc., and furnishes the excuse for pretty liberal fees and management. RESULTS OF OPERATIONS AT THE LIBERTY BELL MINE *Tons mined and milled 510,729 Net receipts per ton $7.20 Costs: General expense $1.05 Mining and development 2.65 Tramming to mill 0.42 Milling 1.70 Shipping concentrates 0.36 Total operating ~ $6.34 Depreciation 0.30 Total $6.64 Profit per ton 0.56 At this mine 26,446 ft. of opening work has been done in nine years, resulting in mining and developing about 900,000 tons of ore, or 34 tons to 1 ft. The cost per foot of development seems to be about $10, and per ton developed, $0.30. The stoping width is about 5 ft. QUARTZ-PYRITE GOLD MINES 349 Analyzing roughly the difference between the costs of the Camp Bird and the Liberty Bell it appears that the former is more expensive, as follows: Per Ton Underground cost $1 .46 Milling 0.15 Treatment charges 1.45 General expense 2.00 Depreciation of plant 0.55 Total $5.61 It may be fairly said that the higher cost at the Camp Bird for milling and treatment charges are entirely justified by the higher grade of the ore. As to other expenses one may doubt their necessity. Other mines in the San Juan region whose reports are avail- able are the Tomboy and the Smuggler Union. I have not investigated these reports, but in a general way the costs at these mines are not greatly different from those of the Liberty Bell. These mines have each reported costs lower than those given, for a single year, but it is doubtful if they would be lower if figured upon a long term of years. In general mining in the San Juan region costs about $7 a ton. The external factors of a rough surface, a severe climate, costly transportation and a debilitating altitude are all unfavor- able. The internal factors are such that only a small tonnage can be maintained. Metallurgically the ores are only fair, and while not markedly difficult, do not seem to permit of full treat- ment at a cost of less than $2 a ton. The explanation, therefore, of the big jump in costs from $1.50 at the Treadwell and $3 at the Homestake to $7 in the San Juan is the cumulative effect of a variety of both external and internal factors. EL ORO, MEXICO The mines at El Oro, Mexico, are well managed; they pay good dividends and issue good reports. The two principal mines are the Esperanza and El Oro on the San Rafael vein and the Dos Estrellas on a parallel vein to the westward. The Mexico mine just north of the Esperanza on the San Rafael lode is promising. The veins are large mineralized shear zones in slate or shale. There are numerous cross faults. The veins are for the most 350 THE COST OF MINING QUARTZ-PYRITE GOLD MINES 351 part obscured by a later flow of andesitic lava which covers the important orebodies to a depth of several hundred feet. The ore is quartz with pyrite sprinkled through it. The gold is very finely divided, and will yield by amalgamation only about 15 per cent. GRADE OF ORE AND OUTPUT It appears that the Esperanza mine up to the end of 1908 produced 1,176,117 tons averaging $19 per ton, and El Oro 1,080,000 tons to the end of 1907 averaging $11.39 per ton, in both cases by actual yield. Probably these figures indicate average ores produced by the principal mines in the district. If so, we get a yield of $16.33. It is probable that the extraction has averaged something like 88 per cent., so that the assay value of the ore as mined must be about $18.50 per ton. Two distinct types of ore have been worked: an oxidized cyaniding ore aver- aging about $13 a ton by assay value, by extraction about $11.40 as stated above for the material mined; and a narrower vein of sulphides discovered and worked on the Esperanza, and lately on the Mexico mine, the ore from which has been treated mainly in the smelters and has been of high grade, much of it running three or four ounces per ton. Below are given the figures for mining and milling at the El Oro and Esperanza up to the end of 1907, since which time the reports indicate nothing to warrant changing them. In general, the milling ores of the district may be described as follows: Assay value $13.00 Loss in milling 1.60 Yield 11.40 Costs mining and milling 7.00 Profit 4.40 Percentage of profit 34.00 Smelting ores produced by the Esperanza in 1906 were: Value per ton $74.50 Freight treatment and deductions $18.75 Cost of mining per ton 5.00 Total cost 23.75 Profit 50.75 Percentage of profit 68.00 352 THE COST OF MINING The external conditions are probably about average for gold mining. The wages for natives are low and their labor inefficient. Water-generated electric power is furnished to the mine. The El Oro company owns a railroad, timber land, and a sawmill, and presumably supplies the other mines as well as its own with timber and transportation. The walls are heavy, and where broken by cross-faults become very soft. Ordinarily the square-set rooms can be kept open to a hight of 40 to 50 ft.; then they must be filled. The mines are pretty hot. The ore while forming in good-sized bodies is sep- arated into streaks in different parts of the shear zone. The development of these requires considerable crosscutting and drifting along the intersected streaks. Work is also done on entirely distinct veins separated by some hundreds of feet of waste. The experience to date has shown the requirements in the way of development to be as follows: Feet Tons Mined Tons Developed El Oro Esperanza 88,803 60,640 820,000 875 000 605,000 142,000 Total 149,440 1,695,000 747,000 About one foot of opening work to 16 tons discovered. COSTS El Oro Esperanza Tons mined Tons milled '. 1,080,788 1 027 282 450,000 333,330 Mining $1 99 $280 Development 0.74 0.80 Milling 077} Cyaniding 1 11 2.63 Water 002 Other . . 13 General 090 1 08 Construction 036 0.19 Total $6 02 $7 50 QUARTZ-PYRITE GOLD MINES 353 The recovery of metals at the two mines is reported for 1906-7 as follows: Gold Per Cent. Silver Per Cent. Total Value Per Cent. Esperanza El Oro 90.64 90.28 57.33 68.55 86.20 86.63 Costs at the Esperanza have always been higher than at the El Oro both for mining and milling. There is nothing in the reports to explain why this should be so. KOLAR DISTRICT, MYSORE, INDIA In Vol. XXXIII, Part 1, of the "Memoirs of the Geological Survey of India," F. H. Hatch gives an excellent practical descrip- tion of the Kolar mines as they were in 1900. Since that time certain changes have been introduced, notably water-generated electric power; the scale of operating has increased, and the costs diminished, but no specific description of these changes has come to my attention. The reports of the various companies give abundant information about output, costs, mine developments, etc. It is possible that something might be changed by Mr. Hatch if the descriptions were to be brought down to the present day, but on the whole the sources of information are satisfac- tory. One feels particularly like complimenting Messrs. John Taylor & Sons, who manage most of the mines, on their com- plete and detailed annual reports to their stockholders. The principal mines are the Mysore, Champion Reef, Oore- gum, and Nundydroog: other mines are not very profitable. The district has been opened since 1882. The output has been steadily increasing, but the maximum seems to have been reached. The climate is tropical; the rainfall averages 30.13 in. per year, but is variable. This Indian gold-field is one of the most instructive examples to be found anywhere in studying the basic principles of mine economics. The center of the field is 183 miles from the impor- tant seaport of Madras; the freight rate for various articles being as follows (presumably per long ton) : 354 THE COST OF MINING Coal in carloads $1 .40 Timber less than 17 ft. long 1.90 Timber more than 17 ft. long 2.24 Steel, cast iron pipes, machinery, and kerosene 3.40 Wire ropes and galvanized iron pipes 4.45 Machinery in small lots 5.87 Explosives 16.67 Indian coal is delivered at the mines for $6.50 per ton; Eng- lish coal for $9.75, and fire wood for $2.56. Ordinary mining timber costs from $20 to $45 per M., a large proportion being of the more expensive kinds. Dynamite costs about 27 cents per pound and blasting gelatin (93 per cent, nitroglycerin) 35 cents. These supplies, it will be observed, are all more expensive than in the United States in the proportion of perhaps two to one.* LABOR AT MYSORE When we come to labor the situation is interesting. Men are employed in the following proportions: Europeans 2.2 per cent. Eurasians 1.6 per cent. Natives 96.2 per cent. I have no means of computing, except approximately, the average wages earned by three classes. Europeans are paid by the month, on contract usually for three years. Transporta- tion is provided by the companies to and from Europe, and quarters, furniture, fuel, lights, and servants also. Men laid up by sickness draw full pay. The salaries vary from $30 a month for some of the miners to $100 for smiths and machinists, and $250 to the highest paid chemists and foremen. Considering the debilitating effect of the climate and the loss of time during illness, voyages, and holidays, it does not seem improbable that the work done by these men costs at least twice as much as work done in the United States would cost if done by men paid the same wages.' Indeed I believe this estimate is too low. Wages of natives are as follows in cents per day. Carpenters 12 to 50 Smiths 8 to 48 Timbermen 16 to 43 Engine drivers 20 to 33 QUART2^PYRITE GOLD MINES 355 Trackmen 20 to 41 Gang bosses 24 to 33 Machine men 20 to 33 Hand miners 16 to 24 Blasters 16 to 24 Landers 16 to 20 Trammers 16 to 18 Muckers 14 to 16 Firemen 12 to 16 Surface coolies 8 to 12 It is, of course, impossible to obtain from these details an exact estimate of the wages paid, but on the assumption that the wages of miners are somewhere near the average for natives and that Europeans average $5 a day including expenses, and Eura- sians $2, we have: 2.2 Europeans at $5 equals $11.00 1.6 Eurasians at $2 equals 3.20 96.2 Natives at $0.23 equals 22.12 100.0 $36.32 This means an average wage of 36 cents or thereabouts, for all employees. FACTORS IN MINING The internal factors are a single marvelously persistent quartz vein, with a few branches, developed for a length of 17,500 ft. The vein occurs in a belt of schists which I suppose, from the presence of beds of quartzite, are undoubtedly in part metamor- phosed sediments. The belt seems to be a syncline, but it is invaded on both sides by intrusive granites. The bulk of the schist consists of altered traps or lavas. There are some later dikes of a basic character. The vein corresponds both in strike and dip, which is about 50 to 55 degrees west, with the foliation of the schists. The ore is a clean quartz containing 0.25 per cent, of pyrite. The quartz occurs in a number of shoots along the vein. Some of the shoots occur in sharp anticlinal folds where something like the saddle reefs of Bendigo, Australia, has been developed in the vein. The direction of other ore shoots along the plane of the vein seems to be about parallel to the axes of these folds. The extent of the shoots is variable; some of the largest are known to be more than 4000 ft. deep along the slope, and as much as 800 ft. wide, measured at right angles to 356 THE COST OF MINING the long axis. It is difficult to ascertain the thickness of the vein stoped; the average is probably between 3 and 4 ft. Tak- ing the vein at large, the poor with the good, the average thick- ness of mill ore developed on the Mysore property in 1907 was 1.8 ft. Although these mines, particularly the Mysore, are looking exceedingly well in the bottom, the thickness and grade of the ore show some diminution. The greatest vertical depth reached is about 2400 ft. in the Edgar shaft of the Mysore. In earlier years, when the mines were less than 1000 ft. deep, vertically, the ore shoots on the Mysore and Champion Reef mines seem to have averaged nearly 5 ft. in thickness. METHOD OF TREATMENT The milling practice is simple. The ore, when properly sorted, yields a clean quartz with very little clayey matter in it. The process consists of amalgamation in a stamp battery followed by cyaniding the tailings. A special cyanide process is used for the comparatively small proportion of slimes. The only dis- tinctive fact is that the crushing duty per stamp is low, being only 2.25 tons per day per 1050-lb. stamp. The pulp is put through screens averaging about 1600 apertures per square inch. The low stamp duty is made necessary by the high grade of the ore. In the Transvaal and at the Treadwell the duty per day is about five tons per stamp. A few years ago a striking and uneconomical feature of the metallurgical practice was that the work was done in a number of small mills instead of in a central large one on each property. This bad feature has been, I believe, largely corrected. It will be seen from the following table that the conditions and costs are fairly uniform for the four properties. Conse- quently it does not seem worth while to give details for more than one. For this purpose the Mysore mine serves excellently. It is an extraordinarily good and profitable property, situated at the south end of the district and covering 7700 ft. along the lode. It is developed to an extreme vertical depth of 2600 ft., equal to 4000 ft. along the incline. The ore is derived from three indepen- dent shoots of which the central one is the more prominent, but all three have proved persistent to the lowest workings. In QUARTZ-PYRITE GOLD MINES 357 OUTPUT AND VALUATION OF ORE PRODUCED BY THE FOUR PRINCIPAL MINES OF THE KOLAR DISTRICT OF INDIA REDUCED TO SHORT TONS AND AMERI- CAN CURRENCY. Name and Date Tons Mined Tons Ore in Sight Yield from Ore Mined Average Ton Dividends Average Divi- dends per Ton Cost Ton Mysore 1884-1898 2,484,562 1,085,000 $52,624,000 $21.18 $27,252,000 $10.96 $9.22 Champion Reef 1892-1908 2,130,748 40,340,000 19.00 17,148,000 8.05 10.95 Nundyroog 1888-1908 1,029,700 133,000 17,763,000 17.24 7,163,000 6.96 10.28 Ooregum 1888-1908 1,660,781 172,000 23,580,000 14.20 7,852,000 4.74 9.46 Four mines 1884-1908 7,305,791 1,388,000 $134,300,000 18.40 59,655,000 8.18 10.22 NOTE. There is reason to believe that the dividends are larger than the real profits because they include sums obtained from stockholders, for pre- miums and new stock issued to cover new construction and developments. This practice, however, has now been stopped and it may be that the costs estimated are not far from the truth, on the theory that the money hereto- fore spent on plant will serve for the future operation of the mines, or at least for the ore in sight. 1907 the record was as follows, expressed in short tons and American currency: Currency Tons mined and treated 233,825 Assay value of ore $20.00 Yield of ore 17.12 Loss in milling 2.88 Extraction in mill 85.51 per cent. Costs per Ton Plant and equipment, including a proportion of the development work, average for eleven years $1.87 Administration 20 Mining 4.68 Milling 63 Cyaniding tailings 23 Repairs to buildings, machinery, and plant . . .90 358 THE COST OF MINING Costs per Ton Surface costs 10 Pumping charges 05 Transport and insurance of gold 15 Kolar Central Metallurgical Establishment ... .01 Medical Establishment 04 Survey department 01 Police and detective force 01 Traveling expenses of employees 04 Kolar Gold Field Electricity Department 01 Telegrams, postages, and incidental expenses in India 02 Directors' fees 11 Salaries and bonuses to managers and clerks. . .15 Telegrams, postage, stationery, etc 03 Total costs equalizing small differences in details 9.25 Net profit per ton 7.87 Profit on gross value of ore mined 39 per cent. Total costs and losses 12.13 A QUESTION OP BOOKKEEPING To charge improvements to capital account, even if they are absolutely new, is a bookkeeping error into which nearly all mining companies fall. This error is, of course, in most cases theoretically rectified by writing off a certain amount of depre- ciation. While in the case of these Kolar mines it appears that the depreciation has kept pace with the increase of capital (for eleven years the Mysore company received from stockholders about 60,000 a year) , this does not alter the fact that the money thus written off did not come out of the mine. To some extent, of course, the money thus provided was used to make a real increase in the company's resources, and to this extent it will be paid back in the shape of increased profits, or lower costs, in later years. But it should never be forgotten for a moment that there is always some work going on about a mine in the shape of permanent improvements, and that for a period of years the average amount thus expended should not be written off the balance sheet; it should be charged to operating. To pay operat- ing expenses out of new capital is either a fraud or a bookkeep- ing sophistry. It is always a mistake more or less complete. It may be partly justified but never wholly. The accompanying table prepared by Mr. Hatch shows the distribution of costs for the year 1899. These costs are a little QUARTZ-PYRITE GOLD MINES 359 higher than the average, but not so much as to give a seriously false impression. Within the past year or two considerable economy has been effected by the introduction of water-generated electric power from the Cauvery falls. In 1899 steam power cost $150 per horse-power year and the cost per ton for the power used was more than $3. Electric power is now furnished for $90 a year, reduc- ing the power cost more than $1 per ton. I will not go into details regarding all the mines, but will give some further facts regarding the Mysore, the largest and best mine in the district. This property in the years 1902-1907, inclusive, did 163,691 ft. of development work, mined and milled 1,210,000 tons of ore, and increased its reserves from 380,800 tons to 1,012,480 tons. The actual ore developed during the period was 1,841,500 tons, being a trifle more than 11 tons per foot of development work. This development with approximate costs was made up as follows: Drifts and crosscuts, 117,912 ft. at $10 equals $1,179,120 Raises, 24,041 ft. at $40 equals 960,000 Winzes, 12,291 ft. at $40 equals 490,000 Shafts, 9,447 ft. at $100 equals 944,700 Total .' $3,574,000 The costs are approximations from Hatch's report. HIGH DEVELOPMENT COST If these costs are anywhere near the actual, and I believe that they are, we- have an average cost per ton developed of about $1.94 and per ton milled of $2.95. In the abstract of Hatch's figures for various kinds of work it is to be observed that the development accounts for -about half the cost of mining. In this connection, however, it is well to point out that a considerable portion of the development work does not appear in the working costs, but is charged to capital account. The only place where this expenditure appears is in the balance sheet where certain sums are " written off " for depre- ciation, etc. These sums amount in six years to $2,122,000 on machinery, plant, etc. Of this a good deal must represent the cost and equipment of Edgar's and other shafts. To show how this bookkeeping works, let us take the revenue 360 THE COST OF MINING account for the year 1907. Here we find that administration and working costs, including directors' fees, insurance, and all general expenses, amount to $8 per ton. To this we must add from the balance sheet, in order to get the management's real estimate of the costs, the sum of $1.76 per ton for depreciation, this being the average for the last six years. With this addition the total cost is $9.76. This, it will be observed, is very close, both to Mr. Hatch's figures in 1899, and to my own estimate based on the output and dividends. Mr. Hatch comments as follows: COSTS AT THE MINES OF MYSORE IN 1899, ACCORDING TO HATCH Mysore Champion Reef Ooregum Nundy- droog Balaghat Coronadel Mine costs $5.79 $7.15 $7.02 $12.12 $4.87 Mill 1.28 1.68 1.41 1.41 1.60 Wheeler pans Cyanide Administration .... 0.69 0.28 0.69 0.89 0.27 $9.46 0.44 0.21 0.75 0.51 0.50 0.79 0.47 0.76 General charges . . . 0.75 0.61 0.49 0.48 0.31 0.49 Total $8.79 $11.29 $10.39 $10.38 $15.13 $8.19 Royalty on gold ore Depreciation 1.58 0.41 1.51 0.26 0.86 0.14 1.12 0.40 0.63 2.20 0.21 0.50 London office 0.39 0.30 0.33 0.65 0.88 0.74 Grand total $11.17 $13.36 $11.72 $12.55 $18.84 $9.64 Reduced to short tons $10.00 $11.93 $10.47 $11.21 $16.82 $8.61 "The working costs are high, but there is not much difficulty in accounting for this. First, the nature of the ore deposit dic- tates a high cost of working, as, for instance, the occurrence of the pay-ore in shoots, which, though of high grade, are of com- paratively limited extent. This leads to a heavy expenditure in development, as much sinking, driving, and crosscutting must be done in waste rock in order to open up pay or shoot ore. The cost of this development work is included in the figures given for working costs. Then again the heaviness or instability of the ground in parts of the mines necessitates a big expenditure on timber to secure the stopes, shafts, and levels. QUARTZ-PYRITE GOLD MINES 361 COST AND GRADE OF ORE " Further, it must not be forgotten that the cost of working a high-grade ore is of necessity greater than that of a low-grade ore, and the reason for this is plain. In mining low-grade stuff the main object is to obtain a large tonnage at a low cost; con- sequently the stopes are carried as wide as possible and the whole mass of the orebody is, as a rule, exploited, the exploratory or dead work being at a minimum. With high-grade stuff, on the other hand, the stopes are kept as narrow as possible, and great care is exercised only to extract the payable portions of the ore- body. Much exploratory work in waste rock is, therefore, necessary in order to locate the pay ore. Similar factors influ- ence the metallurgical treatment. With low-grade stuff the ore is passed quickly through the mill, a high stamp duty being maintained by the use of coarse screening and a low discharge, and the cyanide process is relied upon to catch the gold that escapes amalgamation. Whereas with high-grade ore the usual practice is to crush fine, and to catch as high a percentage of the gold as possible by amalgamation. "For these reasons it is impossible to compare the working costs of high-grade mines, such as those at Kolar, with the low- grade mines of other countries, as, for instance, those of the Wit- watersrand in the Transvaal. At the same time, it must be admitted that a reduction in working expenses at Kolar could no doubt be effected by improvements in milling plant, and by the substitution of automatic mechanical means for native labor in the handling of the ore delivered at the shaft top, and of the tailings leaving the mill. The substitution of a large centrally- placed mill with heavy stamps for several small and scattered mills with light stamps, which at the present moment is being carried out on the Champion Reef, and is in anticipation at Oore- gum, will decrease the cost of milling at these mines. The intro- duction of mechanical haulage, automatic sorting tables, tailings, wheels for elevating the tailings, and pointed boxes for. classify- ing and filling directly into the cyanide vats, all these improve- ments would no doubt have a similar effect. So also will the introduction of water power transmitted by electric current, as it is proposed to do by the Cauvery power scheme." 362 THE COST OF MINING DETAILS OF DEVELOPMENT COSTS, HATCH COST OF RAISING (10x5 FT.) 15.6 FT. PER MONTH Labor, white $8.25 Labor, native 4.50 Explosives 6.25 Supplies 4.90 Compressed air 21.00 $44.90 COST OF DRIVING Hand $9 per ft., rate 15 ft. per month. Machine $11 per ft., rate 30 to 35 ft. per month. Stoping in 4Wt. vein without timbering costs about $1.25 per ton. COST PER FOOT OF SHAFT-SINKING IN KOLAR GOLDFIELDS Nundydroog 12x6 ft. Oakleys' 16x8 ft. Champion Reef 16x8 ft. Edgar's Mysore circ'r 18 ft. Labor $31.27 $32.68 Timber 788 25.22 Explosives and supplies .... Compressed air 13.40 32.84 24.20 33.88 Hoisting Drill sharpening 10.93 0.49 4.84 Speed per month $96.81 15ft. $120.82 25ft. $145.91 28ft. $120 20ft. Equivalent work in the United States may be estimated as follows: Sinking large working shafts (Lake Superior, Butte, Coeur d'Alene, or Cripple Creek), average rate per month 50 ft., cost per ft $100 Raising with complete timbering, 10x6 ft 25 Drifting in average ground, 5x8 ft 9 WAGES AND COST OF LABOR I have given many details about the Kolar mines because I wish to illustrate the extraordinary lack of correspondence between the wages paid and the costs. There does not seem to be any detail in which work at these mines is done cheaper than in the United States. In Cripple Creek, or Butte, or the Coeur d'Alene, where wages average ten times as high as at Kolar, work can be QUARTZ-PYRITE GOLD MINES 363 done just as cheaply. This is true of drifting, of crosscutting, of raising, of shaft sinking, of stoping, of everything on which I can find data for comparison. It is true that supplies cost more than in the United States; nevertheless out of working costs of $8.96 per ton I find that labor must account for about $5.50 or 60 per cent. This is the usual proportion in the United States. We find that the num- ber of men employed to mine and mill 217,770 tons of rock in 1907 at the Mysore mine was 8334 or 26 tons per man per year. At the Camp Bird mine in Colorado, where external conditions are unfavorable, the ore being of higher grade and the costs nearly the same, the wages are ten times as high and the output per man ten times as great. It is inconceivable to me that the energy expended by a miner in Colorado is ten times as great as that expended by the Indian miner. The true explanation of the wonderful difference in performance lies in the industrial efficiency of the community by which the men are surrounded. WlTWATERSRAND The great gold-mining field, Witwatersrand, produces one- third of the world's annual yield of gold, and is so well known to the mining public, and even to the public at large, that any general description of it, other than such as will serve my pur- pose of illustrating the factors governing the cost of mining, is unnecessary. The occurrence of the ores here bears a resemblance to that of two important districts described elsewhere, i.e., to the cop- per conglomerates of Lake Superior and to the Kolar mines in India. Like the Calumet conglomerate the banket beds of the Transvaal are mineralized sedimentary beds, and the value of the material worked is not far from equivalent, but the "Rand" beds are thinner, more persistent, and workable over much greater areas. The Kolar mines, while on a vein of different geological origin and producing ores of much higher value, bear a consider- able resemblance in the persistence and abundance of the min- eralization. Two recent papers by distinguished American engineers throw excellent light on the present condition of the industry. Ross E. Browne has written an exhaustive discussion of " Work- 364 THE COST OF MINING ing Costs on the Mines of the Witwatersrand " (republished in the Mining Journal of London, in the issues of July, 1907) and Thomas H. Leggett (Trans. A. I. M. E., February, 1908), describes the "Present Mining Conditions on the Rand." Mr. Browne sizes up average conditions for the whole district as follows: Per Ton Milled Working cost , $5.85 Capital redemption 1.22 Total expense $7.07 Yield 8.71 Profit 1.64 By capital redemption, I suppose, Mr. Browne means all cap- ital, including probably large sums paid for mining claims. By the theory of costs used in this article such sums are profits paid to somebody by the working of ore from the land and are not, therefore, costs. Accordingly, Mr. Browne's estimate of the cost of capital redemption is somewhat high. A summary of the record of the Witwatersrand is as follows: Tons milled (1884-1908) 113,600,000 Value recovered $1,049,000,000.00 Dividends paid 273,655,000.00 Yield per ton $9.23 Dividends per ton 2.41 Cost per ton 6.82 In 1908 the figures were as follows: Tons milled 18,000,000 Value recovered $144,600,000.00 Dividends paid 41,800,000.00 Yield per ton 8.03 Dividends per ton 2.30 Cost per ton 5.73 It is probable that the dividends in these tables include sums that should properly be charged to redemption of capital, i.e., amortization of plants, and that the costs should be estimated a little higher. On the other hand, it is certain that these costs include all current construction, or depreciation charges, and are a much better exhibit of the real dividend costs than the " work- ing costs " ordinarily published. Almost all the production comes from dividend-paying mines. QUARTZ-PYRITE GOLD MINES 365 On nine representative mines in the district Mr. Browne finds the following average working conditions: Number of stamps operating Ill Working costs per ton milled $5.19 Percentage rejected by sorting (probably at sur- face only) 13 Ratio of tons developed to tons mined 0.90 Width (thickness) of stopes in inches 69 Continuity of reefs, normal for the Rand, unrivaled elsewhere. Average depth of mining in feet 1200 Dip of reef 30 Hardness of ground, solid quartzite and slate. Cost of timber per ton of ore mined 4 cents Cost of coal per ton delivered at plant $3.41 Gallons of water pumped from mine per ton of ore milled 313 Duty of stamp, tons milled per 24 hours 4.85 With the above average conditions the average costs are as follows: Development cost per ton $0.37 Other mining costs 2.63 Total cost per ton hoisted $3.00 Milling, crushing, and amalgamating 0.69 Cyaniding 0.64 General expense at mines 0.25 General expense at head office 0.18 Total $4.76 These figures represent the costs as they would be if all the ore hoisted were milled, but as 13 per cent, is rejected by sort- ing, the cost as divided by the tonnage actually milled is brought up to $5.19. A COMPARISON OF RECORDS I cannot believe that these figures make a disadvantageous comparison with costs of similar operations elsewhere. This opinion is somewhat at variance with the general idea among mining men, and, as I have never been in South Africa, it is perhaps well to explain that I am going wholly upon the consid- eration of the basic principles involved. Mr. Browne sees hope of reducing costs to about $3.75 per ton by increasing the efficiency of white labor, by better direction 366 THE COST OF MINING of colored labor, and by reducing the cost of supplies. With this hope I certainly have no quarrel and it is probably not alto- gether extravagant. Considerable improvements are brought about by necessity and by long-continued effort. As the grade of ore diminishes the cost is inevitably diminished by the simple process, among other things, of refusing to work ores that pre- sent difficulties beyond a certain limit. But as a matter of prac- tical experience, taking into consideration all the ins and outs, good luck, and bad accidents, it seems to me that the performance of the Rand mines is fully as good as that of other mines. To judge better of this let us look up the life history of the greatest of the Transvaal mines, the Robinson, and see how it compares with other great mines of which we have the records. ROBINSON GOLD MINING COMPANY, TO END OF 1906 Tons milled 2,657,768 Total value, $46,535,000 Per ton, $17.50 Working cost per ton 6.36 Construction and improvements 0.78 Total cost per ton milled 7.14 Profit $27,680,000 Per ton, 10.36 Dividends and cash in profit and loss 24,219,000 Real estate, securities, and cash on loan 3,461,000 Nearly 60 per cent, of the entire gross revenue is shown as clear profit. Few mines of this grade can equal this showing of costs. It would be an exceedingly laborious compilation to get the average costs in detail, so I shall content myself with giving the details in a year of which the costs approximate the average. Such a year is 1897 when the total cost was $6.90 divided between working cost at $6.65 and construction at $0.25. In this year the tonnage hoisted was 203,597 of which 23,197 was sorted out on the surface. In addition the amount sorted out underground was estimated at 60,000 tons, making the total stoped about 263,500 tons. Since the sorting out of this waste underground serves no useful purpose in protecting the safety of the work- ings, it was sorted out entirely to avoid the expense of milling. It is probable that the sorting on the surface and stowing of waste underground cost fully as much as the tramming of ore for the mill. For comparing the work done here with certain other mines it is necessary to make these corrections. QUARTZ-PYRITE GOLD MINES 367 MINING COSTS, ROBINSON GOLD MINING COMPANY Tons Per Ton 263,500 stoped $443,694 $1.68 263,500 trammed 21,882 203,597 hoisted 19,671 263,500 mine maintenance and pumping 47,306 320,000 developed 178,334 1.08 0.10 0.18 0.56 $2.60 These figures are as low as those of the Portland mine at Cripple Creek, figured on the same basis; they are not far above those of the Tamarack, or the Calumet & Hecla, where the vol- ume of material in the same area is more than double, and lower than equivalent work in the Mysore mine. It is to be remem- bered that the mining is done at the Robinson on two beds, the Main Reef Leader of a payable width of 18 in. and the South Reef of a payable width of 42 in., on which there is not room for working. The effort is to carry the stopes as narrow as possible. MILLING COSTS Tons Total Per Ton Crushing and Transport to Milling and n Power sorting mill laintenance 203,597 180,400 $18,134 5,465 78,548 40,094 $0.09 0.03 0.43 0.22 $0.77 SECONDARY TREATMENT Vanning, concentration Cyaniding, chlorination 14,966 126,470 Total treatment . $0.07 0.70 $0.77 1.54 Here we have ore worth $20 a ton treated with an extraction of 89.3 per cent, at a cost that seems low enough. A certain correspondence obtains here as elsewhere between the value of ore treated and the cost of treatment, even by the same process. 368 THE COST OF MINING ROBINSON, GENERAL EXPENSE, 263,500 TONS Total Per Ton General maintenance $21,071 $008 General charges 73918 028 Machinery, plant, and buildings. . . 95 716 36 Special charges 23 531 OQ Construction 46038 18 $0.99 If all the rock broken, therefore, were treated, we should find the following comparison with the costs as given: Per Ton Milled (as given) Per Ton Mined Mining $3.90 $2.60 Treatment 1.57 1 54 General expense 1 18 81 Construction 0.25 18 $6.90 $5.13 The gradual diminution both of costs and the grade of ore is shown as follows: Yield per Ton Working Costs per Ton 1890 $46.20 $10.02 1906 13.84 5.30 At the end of 1906, 2,180,000 tons of ore were blocked out, of which the development had been paid for by mining opera- tions to date. The average assay value of the reserves was $14.50 per ton, and the extraction being realized was 93 per cent.; so that a net yield of $13.50 can be expected. It seems plain from the steady reduction of costs that these reserves can be mined for all working and construction costs for $5 a ton, leaving a net profit of $8.50 per ton, or $18,500,000. QUARTZ-PYRITE GOLD MINES 369 NOT A RECORD OF EXTRAVAGANCE AND CARELESSNESS I feel that this record of the Robinson mine shows, in a gen- eral way, the achievements and tendencies of the Rand industry; and that it is a monument, not of extravagance and careless- ness, but of excellent engineering and of broad-gaged and honest management. With this view of the cost problem on the Rand, Thomas H. Leggett is in full accord. I quote from his paper on the " Present Mining Conditions on the Rand," as follows: " As the mining camp grows older the working costs almost invariably decrease, providing the camp maintains a healthful activity with advancing years, and this has been the case on the Witwatersrand, the result being as follows: 1898, average working costs of 65 companies 25s. 1. 3d. 1899, average working costs of 42a companies 25s. 2.7d. 1906, average working costs of 58 companies 22s. l.Qd. 1907, average working costs of 566 companies 20s. S.Qd. a The Boer war broke out in October, hence the records are incom- plete. b Two less than in 1906, due to exhaustion of the Bonanza mine and incomplete records from one other mine. "These costs include mining, development, crushing, and sorting, milling, cyaniding, maintenance, and general expense, but they do not cover depreciation and amortization, these items being more properly dealt with by the directors at the end of the year. These results show the very material decrease of 4s. 6d. per ton since 1899, and are, therefore, approaching now to the 6s. reduction predicted by John Hays Hammond in 1901, but it has taken time to attain this result, as I then pointed out it would do. A comparison of the costs in 1907 with those of 1906 shows a decrease of Is. 5d., or 34 cents per ton, due chiefly to decreased wages and increased efficiency of both white and colored labor, including the Chinese in the latter category, though increased crushing capacity through the use of heavier stamps (up to 1670 Ib. per stamp) and regrinding in tube mills have also aided. "In 1906 fifty-eight companies mined and milled 13,065,624 tons of ore at a total cost of 14,411,219, while in 1907 fifty- six companies milled and mined 14,861,234 tons at a total cost 370 THE COST OF MINING of 15,351,749, being an increase of 1,795,610 tons for an increased cost of only 940,530. " Most of these economics were attained during the latter half of 1907, after the white miners' strike, and some mines made start- ling reductions, as, for instance, the Robinson, which reported costs of 14s. 9d. for November, and the Glencairn, of 15s. Id. per ton. " Such strenuous and successful efforts are now being made to reduce still more the working costs on the Rand, that I think it safe to anticipate another large decrease for the year 1908." LABOR COST NOT EXCESSIVE I have expressed the opinion that costs on the Rand are not essentially different from those that would be obtained were the properties situated in the United States. What about wages? The only direct information I have is the statement of Mr. Browne that whites average $4.60 a day and colored laborers $0.66 per day, and are employed in the proportion of 9.2 colored men to one white man. Average wages about $1.18 per day; as the percentage of colored men varies, so the average wages will vary from time to time. In my judgment the figures demonstrate that the Rand is another proof of the fact that the rate of wages does not deter- mine the cost of labor. Criticism of the Rand has been to the effect that costs are higher there than in the United States. Mr. Browne believes that California labor paid California prices on the Rand would be cheaper than the labor actually employed by about 15 per cent. In California wages are approximately $3 per day. I have estimated average development costs at vari- ous places as follows: Per Foot Rand, average for shafts, drifts, raises, etc $20 Kolar, average for shafts, drifts, raises, etc 22 Cripple Creek, average for shafts, drifts, raises, etc. 14 WAGES Per Day Rand $1.18 Kolar 0.36 Cripple Creek 3.40 An exact comparison cannot be made, because the rocks and QUARTZ-PYRITE GOLD MINES 371 conditions are different. In the Rand the rock is harder than at Cripple Creek, and the openings probably average larger, but on the other hand, there is less water to pump. EFFIENCY OF LABOR A FUNCTION OF THE COST The point I am seeking especially to bring out is that criti- cism has been applied to the inefficiency of Rand labor as if it were a special case, and that because wages average low on the Rand costs ought to be correspondingly low. I contend that this assumption, if carried beyond certain narrow limits, is an incorrect one, and if established it would be in opposition to a general economic law. President Roosevelt's great work has often been called a reaffirmation of the Decalogue. I am afraid that the conclu- sions I have arrived at are of the same class. You will remem- ber the scriptural phrase, "The laborer is worthy of his hire," and the common proverb that the " Workman is known by his tools." These statements contain the essence of the problem of the cost of labor, always the fundamental and final element in the cost of anything. The gist of the whole subject was tersely stated by the first Lord Brassey, the great English contractor, who said that the same work costs the same money anywhere regardless of the price of wages. The workman, the tools, and the wages go hand in hand. Good wages command through competition, effective workers. Good workmen create efficient tools. On the other hand, it is a truism to say that high-class tools and machinery can only be used by men who have intelligence enough to secure the wages their efficiency justifies. Where a man's idea of moving dirt is to fill a basket with his hands and carry the basket on his head, his wages correspond with the fruitfulness of his idea; he earns 10 cents a day. Where dirt is moved by the complex organism of modern civilized industry which applies external power through the agency of railroads and steam shovels, the men who operate the tools are better paid. The master of the industrial enterprise, which may be described as the greatest tool of all, a mechanism fashioned by the combined efforts of countless brains to direct the united efforts of men and energy to useful work, is pretty sure to be a millionaire; the man who runs the steam shovel gets $5 a day; the 372 THE COST OF MINING laborer who moves the ties in front of the steam shovel gets $2 a day. In the world's market the product is worth the same thing whether it is the result of an industrial miracle or of infi- nite but stupid human labor. When mankind produces efficiency it gets a due return for it, a return which is expressed pretty accurately in wages. A RULE WITHOUT EXCEPTIONS The only reason why these conclusions are not accepted as truisms is that people are suspicious of each other and are accus- tomed to doubt the fairness of the distribution of wealth. That this distribution is a matter the fairness of which can only be guaranteed by ceaseless vigilance, it is a folly to doubt; but on the whole I believe everybody concerned does exert vigilance, a vigilance made instinctive by the fundamental laws of the evolu- tion of life, and on the whole the distribution is pretty fair. To avoid possible errors, however, we had best perhaps not apply this generalization to work of an ephemeral character, but only to permanent or semi-permanent industries where labor has time to adjust itself to competition. But here we have to meet the question, Are not modern methods employed in South Africa and India? Have we not sent there our best engineers, our most modern machinery, and our best methods? If so, then why are not the men more effi- cient and the wages higher? I answer that it is indeed true that we have sent many civilized appliances to those places, but not all. Among the things we have not sent are the surroundings, point of view, ambition, and energy of a civilized community. The few hundred or few thousand Europeans who operate mines in Africa or India are immersed in an ocean of black humanity, upon which the small foreign community has an influence, true enough, but not such an influence as to revolutionize the habits, aims, and expectations of the natives. An enterprise so situated must take into account at the begin- ning the state of mind of its future employees, and it would be silly to make such plans as might run counter to their prejudices; and, even if the managers had hopes of making the natives even- tually as effective as Europeans, he would have to plan his opera- tions on a different basis. As a matter of fact, such an expectation is hopeless; an individual Kafir or Hindoo may fill a certain QUARTZ-PYRITE GOLD MINES 373 position as effectively as an European, but to expect a large body of such people to become collectively as effective as a body of Europeans whose ideas had been trained for generations along lines making for an entirely different standard of effort is quite absurd. A considerable body of whites may indeed supply a certain amount of mental and nervous energy to the natives which the latter could not supply for themselves, but in so doing the white men must use up energy in the direction of others that they might otherwise use in their own labors. If a body of colored men in a colored man's country is going to turn out work under the direction of white men as cheaply as the white men can do it themselves in their own country, they must do it by working for lower wages. This is exactly what happens in every case. It is a rule to which there are no exceptions. CHAPTER XX CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD Development of Cripple Creek and Kalgoorlie The geology of Cripple Creek Estimate of aggregate results Portland Mine Kalgoorlie The costs of five prominent mines Comparison of Cripple Creek and Kalgoorlie Goldfield, Nevada Goldfield Consolidated Mines Co. Estimate of costs. CRIPPLE CREEK AND KALGOORLIE THESE two important gold-mining districts were discovered and opened on opposite sides of the globe at about the same time, shortly after 1890. Their appearance added greatly not only to the output of the yellow metal but also to the interest in mining enterprises. It was confidently believed for a number of years that they represented a type of ore deposits that had before been overlooked on account of their refractory nature and their elusive non-spectacular appearance; in other words, because they were hard to treat and hard to find, and that many other similar ones would be discovered. This expectation, though natural, has not been borne out by events; for no important new districts of the same type have, been discovered since, and the original camps after a history of less than twenty years find themselves already old and declining in real and comparative importance. Nevertheless, their development and exploita- tion have been exceedingly interesting episodes in the history of gold mining and the men who took part have added much to the science of mining and metallurgy not only in gold but in other metals. The parallelism between the two districts is, I believe, more apparent than real. About the only point in common is the occurrence of tellurides of gold, but even in that particular the similarity is not by any means complete. At Kalgoorlie only a part of the gold is associated with tellurium, while at Cripple Creek it nearly all is. The result is that in the two camps the metallurgical problem is different; at least it has been worked out differently. 374 CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 375 When we come to geological and structural relations there is little similarity. At Kalgoorlie the veins are in a volcanic for- mation, apparently of great geological age, that has been sub- jected to severe and deep-seated dynamic action, resulting in the formation of strong lodes in shear zones. CRIPPLE CREEK MINES Cripple Creek, on the other hand, presents deposits in an extinct but geologically recent volcano. The rocks have not been subject to dynamic or metamorphic action, except those incident to the formation of the veins. The productive area is elliptical in outline with a length of about five miles from N.W. to S.E. and a width of three miles from N.E. to S.W., and con- tains numerous veins throughout, but the most valuable ones seem to be near the periphery of the volcanic mass, many being in the enclosing granites at or near the contact. The veins are apparently all of the same age and of the same character, being deposits in fissures that result from adjustments following the cooling of the volcano. There was very little faulting along the veins either preceding or following the mineral- ization. The deposits vary in character according to the inten- sity of the mineralization along the fissures and according to the character of the rocks traversed by the fissures. In some cases a vein will be merely the quartz filling of an open crevice with very little impregnation of the wall rocks. In other cases, the deposit of quartz in the fracture planes is minute in quantity, but extends out into innumerable joint planes along which there has been a limited impregnation of the wall rocks. In this case the workable ores have the form of a stock-work. In still other cases the walls of a fissure are altered considerably for several feet on each side of the crevice by the introduction of new quartz replacing certain minerals in the original rocks. This occurs more commonly in the granite, but sometimes in basalt dikes, and wherever it happens the ore becomes a homogeneous mass. Speaking generally, the ore deposits are either too small or too imperfectly mineralized to allow of the mining of merchant- able ore in mass. A large amount of waste must be broken, of such character that it can better be rejected by hand sorting than by any other means. While it is not possible to give exact figures on this point it is a fair estimate that only 40 per cent. 376 THE COST OF MINING of the material stoped is shipped to the mills. The amount of development work required is very great. Up to 1903 it appears that some 2,300,000 ft. of shafts, drifts, crosscuts, raises, and winzes had been dug for a total output of some 3^ million tons of shipping ore and some 9 million tons of ore stoped. Since the development work may be estimated to average some $14 a foot, it appears that it must have cost at least $8 a ton for all ore shipped from the district up to that time, for development alone. The cost of stoping the same ores must have averaged not less than $8 a ton more. The cost of freight and treatment in mills and smelters may be estimated at an additional $9 or $10, so that the total cost, exclusive of plant, was $26 per ton shipped and certainly more than $10 per ton stoped. If we add the plants, the total estimate for all ores will not fall far short of $30 per ton shipped, and $12 per ton stoped. The ores averaged probably $36 a ton, leaving a profit of about $6 a ton or less than 18 per cent, of the gross value. These figures being for the district as a whole, they naturally include a good many failures. Some of the mines have secured lower costs throughout their history, and many are securing much lower costs now. The dominant factor, however, in lower costs is the lowering grade of the ore. In 1899 the ore shipped averaged $36.73 per ton. In 1906 the average had fallen to $20.35 per ton. PORTLAND MINE This is the best mine in the district and it presents good examples of all the types of deposit known in Cripple Creek. Most of the ore has come from an area of some 60 acres in which there have been done up to the end of 1908 above the 1500 ft. level no less than 212,593 ft. of development work. This devel- opment was necessary to open up a great number of veins, some of which were independent and others had a mineralized connec- tion with other veins. The total production of shipped ore was 949,382 tons, valued at $29,430,842, giving an average of $31 per ton. The total amount stoped may be estimated at 2,400,000 tons, so that we may estimate that it required one foot of develop- ment work for every 4^- tons shipped and for every 11 tons stoped. The dividends paid amounted to $8,227,800 and the quick assets to approximately $500,000 more, making total earnings CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 377 $8,727,000, equal to $9.30 per ton shipped. A rough estimate of average costs is as follows : Per Ton, Shipped Per Ton, Crude Development $3.00 $1 20 Plant 1.50 .60 StopinfiT 800 3 20 Freight, treatment, and deductions 9.20 3.68 Total $21.70 8.68 The recent history of the mine shows much lower costs largely due to a diminution of the grade of the ore and of the amount of development work done, and also to the fact that the company has been milling its own ores. In 1903 the mine was shipping ores at averaging $30 per ton and doing one foot of development work for 4^ tons shipped. In 1908 the grade of the ore had fallen to $19.45 per ton shipped and the development work was only one foot to 16 tons shipped. The last report that gives operating costs in detail is that for 1905, from which I get the following data: The costs were as follows: Tons shipped 109,232 Average yield per ton after deduct- ing mill losses 21.96 Development work accomplished.. 21,073 feet equal to one foot to 5^ tons. Per Ton, Stoped Per Ton, Shipped Estimated at 2k Times Amount Shipped Sloping $7.85 $3.14 Construction at mine 29 12 Development 1.22 49 Transportation to mill 1.37 .55 Milling and construction 3.49 1.40 Amortization of mill 1 00 40 General expense 08 03 Total cost $1530 $6 12 Profit per ton 6.66 2.26 378 THE COST OF MINING Grouping the costs per ton shipped it appears that the expenses at the mine were $9.36 and those at the mill, includ- ing transportation, $5.94. The extraction of the mill was 95.82 per cent. When we consider that the ore thus treated is obtained by rejecting at the mine a large, part of the ore stoped, and that the rejection means a loss of some low-grade ore which must be com- puted to average some $2.50 per ton, we find that the losses from sorting, assuming that 60 per cent, is rejected, must equal $1.50 per ton stoped. On this basis it appears that the grade of ore that can be mined under the conditions exhibited is approxi- mately $8 per ton where sorting can be practised, and where the ore can be shipped without sorting it must be $10 per ton. With the still lower grade ores which have been mined since 1905 a certain lessening of cost is obtained by diminishing the proportion of development work and on account of the lower transportation cost for lower grade ores. The freights from the mine to the mill are based on a sliding scale according to the grade of the ore. MILLING The mill in which the ores are now treated was built in 1901 at Colorado Springs, some forty-five miles from the mine. The cost of the milling plant is given at $910,000. Owing to the steady diminution both in volume and in grade of the ore it does not seem unfair to expect the practical exhaustion of the mine within a few years. The amount of ore treated in the past by the mill is approximately 600,000 tons and it does not seem unreasonable to charge the ore with $1 per ton for the amortiza- tion of capital in the mill. It must be remembered that this capital was obtained by withholding dividends from the stock- holders, and the ore now being treated is enjoying the value thus created. The mill treatment consists of dry crushing, followed by careful roasting of all the pulp; chlorination in barrels and con- centration of the tailings. The concentrates shipped amount, I believe, to about 1 per cent, of the ore. The Portland mine while representative in a way of the whole Cripple Creek district is decidedly a better mine than most of the others. Its costs are undoubtedly below the average, although CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 379 there may be some like the Strong and the Golden Cycle, which have enjoyed lower mining costs on account of having a more FIG. 20. Illustration of the development work in the Portland mine and vicinity, where 1 foot of opening work has been necessary for mining 4^ tons of shipping ore. homogeneous ore. Its history is fairly indicative of the dis- trict in which variation in costs is probably due in the main to development work. Many properties that have produced just 380 THE COST OF MINING as good ore on the average as the Portland have not been profit- able because their output has been spasmodic and the earnings from an occasional bonanza have been absorbed in prospecting. The Portland mine has been well and energetically managed from its very beginning. It has created its plant out of earnings and has consistently made money for its stockholders. From time to time there has been criticism of its management and methods, but I am convinced that such criticism has on the whole been ill-considered, being based largely on comparisons with other properties that have issued only partial statements of costs for limited periods. Cripple Creek is a good example of a mining camp where results have not been fully understood. For instance, it is, or was, commonly believed that labor in Cripple Creek was exor- bitantly paid and ineffective. In my opinion the truth is the exact contrary of this. The miners of Cripple Creek have always been an exceedingly intelligent and effective lot of men. The wages average, it is true, some $3.40 for the eight-hour shift, but competition for the places has allowed operators to work with selected men. While the climate is fairly healthful the altitude of 10,000 ft. above the sea certainly diminishes one's endurance as compared with sea level conditions; but to clinch the argument as to comparative efficiency of the highly paid labor of Cripple Creek with that of other places I will give the following figures on the cost of development work in the Port- land mine for the first half of 1903. 896 FT. DRIFTS AVERAGING 5 FT. BY 7 FT. Labor Costs Per Foot Tramming $898 38 $1 00 Pipe and trackmen Machine men . 125.12 1 686 .14 1 88 Total labor $2 709 50 $302 Other Costs: Use of machines, air, etc Repairs, cars, etc $867.57 6998 $0.97 08 Explosives 1 279 76 1 43 Hoisting 414.53 .46 General expense, surveying, assaying, bosses . . 515.20 .58 Grand total $5 556 54 $6.20 CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 381 1229 FT. CROSSCUTS 5 FT. BY 7 FT. Tramming t .... $1,13887 $093 Pip6 and. trackmen 149 37 12 Machine men 2,473.49 202 Total labor $3 761 73 $3 07 Other Costs: Use of machines, air, etc. . . $1 191 24 $097 Repairs cars etc 111 28 08 Explosives 2,044.65 1.66 Hoisting General expense, surveying, assaying, bosses . . 656.67 819.26 .53 .67 Grand total $8,684.83 $7.07 112 FT. RAISES AND WINZES Tramming $105 76 $ 094 Pipe and truckmen Timbermen . . 3.37 133.17 .03 1 19 Machinemen 354 50 3 17 Total labor 596.80 $533 Other Costs: Use of machines, air, etc Repairs cars, etc. . . $186.25 684 $1.66 06 Explosives 158 52 1 41 Lumber and timber 170.65 1.51 Hoisting General bosses assaying etc. 44.41 5037 .40 45 Grand total $1 213 84 $1084 The grand total cost for all underground labor was $7.068 for 2237 ft. of development work, equal to $3.11 per ft. While it is not possible to pretend that these figures are an average for the history of the mine, it is evident that they exhibit a good record of labor efficiency. The rocks through which these open- ings were made might be classed as eruptive rocks of average hardness, being andesites and granites. There was no pumping charged against these costs. This is another evidence of the lack of correspondence in mining costs between rate of wages and the cost of labor. If the same kind of work is done cheaper anywhere I have not been able to find the place. 382 THE COST OF MINING KALGOORLIE MINES As remarked above, the resemblance of Kalgoorlie to Cripple Creek is more apparent than real, being based largely on the occurrence of telluride ores in both places. The external factors at Kalgoorlie are much less favorable on account of a dry hot climate and long distances from populous centers. The internal factors are more favorable than those of Cripple Creek. The lodes in Kalgoorlie are much larger, more persistent, and better mineralized. Instead of being split up into a multi- tude of small veins containing short and inconstant ore shoots, Kalgoorlie mines have only a few lodes which present ore shoots of an average stoping width of 11 J ft. The lodes have been found to be payable to a depth of 2600 ft. Comparing the two districts at large, it is probable that Kalgoorlie has one capital advantage in having a much smaller proportion of development work to do. Recollecting that all Cripple Creek mines seem to require one foot of development work for every four tons stoped, making a cost of more than $3 per ton for that account alone, it seems that Kalgoorlie enjoys a considerable advantage in that particular. I have, however, no means of obtaining full figures for the whole district of Kalgoorlie, upon which to base an exact comparison, but am compelled to draw conclusions from the records of some individual mines as compared with the Portland mine. In stoping the Kalgoorlie mines have a marked advantage in being able to avoid sorting. The ore is sent to the mills prac- tically as it is broken in stopes of considerable width. There is no evidence, however, that the cost per ton of rock handled is any lower in Kalgoorlie than* it is in Cripple Creek. When we come to milling we find that the figures are some- what in favor of the Australian district. The ores are milled on the spot, thus avoiding railroad transportation charges. The processes themselves are slightly cheaper than those employed at Cripple Creek, but the extraction of the gold is somewhat less perfect, being from 85 per cent, to 93 per cent, as against about 96 per cent, in the Colorado camp. Two distinct methods are employed about equally. The first method is wet crushing in stamp mills followed by amalga- CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 383 mation, by concentration and cyaniding of sands and slimes, the concentrates alone being roasted and then treated by a special cyanide process. This process effects a saving of from 85 to 93 per cent, of gold at a cost of from $2.21 to $3.92 per ton, vary- ing according to the size of the mills and the grade of ore. The alternative process consists of dry crushing in ball mills followed by roasting the entire pulp and then cyaniding. This process saves from 90 per cent, to 92 per cent, of the gold at a cost which seems to average somewhat higher than the other processes, averaging for two mines $4.20 per ton in 1905. The largest mills in Kalgoorlie have a capacity of more than 20,000 tons a month as against 10,000 tons for the Portland mill. It is possible that if Cripple Creek ores were milled on the same scale, the costs would be lower than they are. When we come to con- sider the difference in natural advantages between the two points, it is evident that the Kalgoorlie ores are at a disadvantage. They have to be treated under the most unfavorable conditions: water, coal, and all supplies being extremely expensive, while in Colorado the mills pay little or nothing for water and are situ- ated in proximity to coal mines. The following is given as a characteristic analysis of ore: Silica 60 per cent. Alumina 11 per cent. Ferrous oxide 5 per cent. Pyrites 7 per cent. Calcium carbonate 7 per cent. Magnesium carbonate 6 per cent. Soda and potash 1^ per cent. Water 1 fV per cent. The following table illustrates the diminishing grade of ore with increasing depth in the Great Boulder mine: 300-400 $29.60 400-500 39.90 500-600 49.50 600-700 18.80 700-800 28.70 800-900 27.20 900-1000 27.30 1000-1100 24.60 1100-1200 . 19.70 384 THE COST OF MINING 1200-1300 19.80 1300-1400 13.40 1400-1500 14.60 1500-1900 12.70 Calculated average $22.00 per ton. If we assume that this ore is worked with an extract of 90 per cent., the actual yield would be somewhat less than $20 per ton. These figures are quoted from an article by Mr. G. W. Williams on " Mining Practice in Kalgoorlie," in the Engineer- ing and Mining Journal of January 25, 1908. Our English friends have been disposed to believe that their practice in Kalgoorlie has been superior to that of Colorado. It is possible that they may be right in this contention, but it must be remembered that they do not secure as high an extrac- tion as the Colorado mills, and in making comparisons of costs they may overlook some of the dominant factors. In order to convey in general terms a comparison of the operations in the two camps I present the following tables showing the results in 1905 at five of the principal properties of Kalgoorlie, trying in each case to present the figures as nearly as possible in the same manner as those given for Cripple Creek, and reducing all state- ments to short tons and American currency. CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 385 KALGOORLIE MINES WHERE ORES ARE CRUSHED WET IN STAMP MILLS AND ONLY CONCENTRATES ROASTED. RECORD FOR 1905 SHORT TONS Ivanhoe Oroya- Brownhill Golden Horse- shoe Tons 196,569 Assay value per ton $15.50 Loss in milling 2.36 Yield 13.14 Feet development for year 6,808 Cost development per ton $0.82 Current construction 0.65 Working Costs: Breaking ore 1.50 Filling stopes .24 Tramming and hoisting .40 Total mining . 2.12 Rock breaking .09 Ore transport .03 Milling 50 Concentrating .12 Roasting concentrates... 1 ton concen- .10 Cyaniding concentrates. . . trates to 18 .06 Fine grinding concentrates crude .02 Fine grinding sands .16 Cyanide by percolation .21 Cyanide by agitation .60 Filter pressing .15 Precipitation and smelting .11 Re-treating .01 Maintenance Total treatment 2.21 General expense London and Kalgoorlie ... .51 Realization of bullion .14 Deduct profit on stores .10 Net working costs 4.94 Taxes 0.30 Freight and treatment on ore shipped (Golden Horseshoe = $22.79 per ton) Total estimate of cost 6.45 Losses in milling 2.36 Total costs and losses 8.81 Profit per ton 6.69 Percentage profit 43 112,713 $30.21 2.11 28.10 12,285 $1.43 2.17 0.83 0.28 0.58 1.69 .16 .12 .51 .13 16) .12 .07 .09 .31 1.70 .40 .11 .22 3.92 .64 .25 .14 6.36 0.80 10.76 2.11 12.97 17.24 57 249,800 $14.87 1.65 13.22 8.047 $0.49 1.08 2.24 1.32 .10 .98 .13 .06 2.59 .42 .02 0.31 2.11 9.26 1.65 10.91 3.96 27 386 THE COST OF MINING KALGOORLIE MINES WHERE ALL ORES ARE ROASTED Great Boulder Proprietary Great Boulder Persever- ance Tons 147,900 165 465 Assay value $20.56 $13 94 Loss in milling Yield 2.47 1809 1.30 12 64 Development feet incl. diamond drilling . . . Costs per ton treated Plant expense 7,373 1.41 14,163 051 Development Mining Ore breaking 1.07 (average 3 yrs.) 207 1.60 2 20 Treatment Sulphides Cyanide plant (tailings) . . Tailings distribution Tailings transport Realization of bullion Purchase tailings Insurance 2.13 1.01 .05 3.81 .95 .12 .35 .16 .04 10 General expense London Kalgoorlie Taxes Australia .31 .39 49 .24 .29 11 Grand total cost per short ton Mill losses 8.93 2.47 10.48 1 30 Profit per ton $11.40 9 16 $11.78 2 16 Percentage profit 44.5 15.5 Casting up an average of the ore produced by these mines we find that the assay value of all five was about $17.60 per ton. It may be interesting to make a sort of comparison between these mines and the Portland of Cripple Creek in order to observe the difference in results obtained on an ore of equivalent value in the two districts. In order to avoid the labor of averaging costs let us take the results of the Ivanhoe mine, which produces ores nearest the average in grade, and assume that the Portland mine were producing the same grade of ore, using the costs reported by each for the year 1905. Comparison of results at Ivanhoe and Portland mines, assum- ing that each produces ore averaging by assay $15.50 per ton, but that the Portland mine rejects by sorting 60 per cent, of ore stoped and that the waste rejected averages $2.50 per ton: CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 387 Ivanhoe Portland Tons mined per foot develop- ment Cost development 27 $0.82 Tons mined per foot develop- ment Cost development 13 $049 Cost for current construction mine and mill Mining Sorting losses 0.65 2.12 0.00 Current construction mine only Mining and sorting Sorting loss 60 per cent of $2 50 .12 3.14 1 50 Transportation to mill 03 40 per cent of $2 00 80 Milling Amortization of mill (included under construction) 2.18 000 40 per cent, of $3.50 40 per cent of $1 00 1.40 40 General expenses .85 (included in costs mainly) 0.03 Loss in milling Total costs and losses 2.36 9 01 4 per cent, of $35.00 1.40 9 28 Deduct profit on stores Net cost .10 8.91 0.00 9.28 Profit per ton Percentage profit 6.69 43 6.22 40 The Ivanhoe is stated by Mr. J. H. Curie (" Gold Mines of the World") to be the best managed mine in Kalgoorlie. Further- more, it is one in which the wet crushing method is used. Unde- niably it is the one with which the Portland can least afford to compare itself. Were we to take the Great Boulder and the Perseverance for comparison we should find the figures very much in favor of the Colorado property. Those properties show milling costs of $3.19 and $5.39 respectively, and exhibit the following comparison (using the same figures for the Portland as before) . Great Boulder Proprietary Great Boulder Perseverance Portland Assay value of ore Total operating costs Loss in milling and sorting $20.56 8.93 2.47 $13.94 10.48 1.30 $15.50 6.38 2.90 Total costs and losses 11.40 $11.78 $9.28 It is plain that there is no ground for making a comparison 388 THE COST OF MINING favorable to one district and unfavorable to the other; and that if the managements in the two districts were to be exchanged the stockholders would not have much cause to worry. Since 1905 the mines have undoubtedly succeeded in lowering their costs somewhat, as in the case of Cripple Creek, in pro- portion to the diminishing grade of the ore. The Golden Horse- shoe mine in the years 1907 and 1908 treated 554,131 tons with an average yield of $10.95. The dividends paid were $2,405,600, equal to $4.34. Assuming that the dividends equaled the ac- tual profit, the cost figures out at $6.61 per ton. This compares with the total of $7.15 for the same mine in 1905. It is to be remarked that in the tables given above the Golden Horseshoe ships 7 per cent, of its ore to smelters in the form of concentrates and high-grade ore. This imposed a further cost of $2.11. This mine is still securing a profit of 40 per cent, of the gross value of gold produced. Its complete record for eleven years' operation shows an output of $33,154,000 in gold, from which $13,468,000 have been paid in dividends, equal to 41 per cent, of the gross yield. The total number of tons treated is not given, but it will approximate two million, so that the yield for the life of the mine has been about $16.70 per ton and profits $6.70, leaving $10 as the cost of operating, including all plant and development. The records of the mine, however, do not indicate the expenses and deductions incurred for shipping ore to the smelters, simply reporting the sums received net from such shipments. If these expenses were included it is probable that they would make an addition of something more than $2 per ton both to the costs and to the yield of gold, making the total costs something more than $12, and the yield of gold approximately $19 per ton. If the extraction averaged 90 per cent., the gross assay valuation of the ores mined would be about $21, which approximates very closely to that of the Great Boulder. No mines in Cripple Creek have produced anything like such quantities of ore of this grade, nor have they earned such large dividends. The fact is that the Kalgoorlie camp contains only nine or ten mines of first-class importance, but these have pro- duced nearly all the gold and all of the dividends of the district. In them the values have been concentrated into a much smaller space than in the case of Cripple Creek, where the output has come from a large number of comparatively small producers, and where CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 389 payable values have practically ceased at a depth of 1200 ft. This group of dividend-paying properties are therefore better and higher grade mines than any in Cripple Creek. Their out- look for the future is also far more attractive. The Ivanhoe reports reserves of 934,000 tons, averaging $11.75 per ton, and good ore at the 1970 ft. level; the Golden Horseshoe 1,065,000 tons averaging $12, with $15 ore on the 2000 ft. level; the Great Boulder 731,000 tons, averaging $16, and good ore on the 2600 ft. level; the Associated 483,517 tons, averaging $10 per ton; in each case assuring the product for 3 to 4 years, and an average profit of 40 per cent, of the gross value. It would not be surpris- ing if they proved payable to much greater depths. GOLDFIELD, NEVADA This district was discovered in 1903 about twenty miles south of the somewhat older camp of Tonapah, the success of which had served to attract many prospectors to the comparatively old mining regions of Nevada. The discovery in that year of some rich ore on the Jumbo and Combination mines started a considerable excitement during 1904 followed by comparative quiescence during the latter part of 1905; but the discovery of an extraordinary bonanza on the Mohawk claim in April, 1906, encouraged the recrudescence of the mining boom not only in Goldfield but in other parts of Nevada, until the excitement reached by the end of 1906 a degree of extravagance for which it would be hard to find a parallel. About that time the owners of the Mohawk, pursuing their good fortune with commendable intelligence and energy, secured most of the promising ground in the camp and formed the Goldfield Consolidated Mines Com- pany, which has to-day, after a period of reorganization and development, the most productive and profitable gold mine in the world. The Goldfield district is in a region of volcanic rocks 'of doubt- ful but probably rather recent geological age. A series of great quartz veins, or rather zones of silification is found, indicated by a series of bold outcrops which have a strike usually nearly north and south. It seems probable that the gold belongs to a later mineralization, because the quartz masses are nearly or quite barren. The rich ore shoots seem confined to smaller fissures that traverse the great quartz masses in various directions and 390 THE COST OF MINING have produced a considerable amount of brecciation in them. These later fissures often cut the great quartz reefs at right angles and the ore shoots seem rather more apt to occur along the flanks than in the interior of the reefs. There have been discovered a number of rich bonanzas, probably due in considerable measure to a process of reconcentration near the surface, but exploration has not proceeded deep enough to establish this as more than a probability. The grade of the ore is already diminishing rapidly owing to causes that are universal in such districts. Owing to lack of treatment facilities on the ground, and to the high cost of trans- portation, at the beginning, only high-grade ores could be shipped. In 1906 the Mohawk bonanza produced in eight months upwards of 70,000 tons of ore averaging $120 per ton. With the institu- tion of milling plants on a large scale, lower grade ores can be treated so that at present the Goldfield Consolidated is mining 20,000 tons a month of ore averaging $40 a ton. That such values will be maintained is an unreasonable expectation that has never been indulged in by the management. I am led to believe that the actual developments indicate about one-half a million tons of ore that will average between $20 and $25. During the past two years the efforts of the management have been directed towards the completion of a satisfactory organiza- tion, the prosecution of development and the construction of a new mill. This was done so successfully that at the beginning of 1909 the property was ready to begin extensive operations on a new basis. A magnificent modern mill was built with a capacity of 600 tons a day with a railroad to provide for trans- portations of ores to it, together with some additions to the mining plant at a total expense of $900,000. During 1908 17,460 ft. of development work was done by the company at an average cost of $17.60 a foot and 20,463 ft. were done by leasers. The amount of ore developed by this work is not stated, but the lessees shipped only 25,600 tons and probably did not put much ore in sight, so that this portion of the develop- ment work only seems to have opened up to 1J tons per foot. What the cost for development will average is a question that probably will only be determined after several years' experience, but judging from the large amounts done to date, it is hardly likely that the cost per ton will be less than $2 from this item. CRIPPLE CREEK, KALGOORLIE, AND GOLDFIELD 391 The cost of sloping will undoubtedly vary according to the extent to which ore must be sought in narrow seams, but experi- ence to date seems to indicate that ore of the milling grade will be found in fairly wide stopes, so that the cost of stoping will probably be about $2. In addition to this the report for 1908 seems to indicate that general expenses will approximate 30 cents per ton on an output of 240,000 tons a year. It would seem, therefore, that the cost of mining might be calculated at about $4.30. MILLING Mr. J. H.- MacKenzie, manager, describes the milling process briefly as follows: " Crushing in gyratory rock breakers and stamps, with regrind- ing to slime and tube mills; amalgamation over copper plates both before and after milling; concentration by means of Deister slime tables; cyanidation of tailings from concentrators with the aid of Pachuca adjutators and Butters niters and zinc dust pre- cipitation. Concentrates are treated in an auxiliary plant by means of a modification of the cyaniding process, and products from all departments of the mill are refined and shipped directly to the mint as gold bullion." This process is very similar to that employed at Kalgoorlie and it is very probable that the costs will be approximately the same. Experience in actual operation has not gone far enough to demonstrate exactly what it will be, but it is worth remark- ing that the mill is an extremely good one and works with the greatest precision, giving an extraction of about 94 per cent, gold. If we assume that the costs will be the same as at the Ivanhoe in Kalgoorlie, which is a modern mill of the same size, namely, 100 stamps, we may calculate the cost of treatment at $2.20 a ton including transportation from the mines. It is to be remembered that the cost of the plant is approx- imately $900,000. Owing to the erratic character of the ore it would seem wise to amortize the plants in five years, which would make a calculation for amortization of 75 cents a ton. We may also calculate that current construction will amount to about 25 cents a ton, making a total plant cost of $1 per ton treated. On this basis we might calculate the costs as follows: 392 THE COST OF MINING Mining $4.30 Milling 2.20 Construction . 25 Total current costs $6.75 Add for amortization 75 Total cost per ton $7.50 With an extraction of 94 per cent, these costs indicate that the minimum assay value of a payable ore should be $8 a ton. While the above figures are given only as approximations it is nevertheless true that they are made with some reference to the figures unofficially given out by the company for the present year and they may be accepted with some confidence. For the present year the yield of gold from this property promises to be enormous, perhaps $8,000,000 gross, on which net profits upwards of $5,000,000 may be realized. Such an output will be a new record among the gold mines of the world. CHAPTER XXI SILVER MINING AT COBALT AND GUANAJUATO Phenomenon of the sudden decline of the price of silver compared with gold Present inferior position of silver mining Cobalt as an example of high mining costs Logic of costs Guanajuato. SILVER MINING BY far the greater portion of the silver of the world is now obtained as a by-product from mines that are operated chiefly for lead, copper, or gold; and in this connection the metal has been frequently touched upon in preceding chapters. There are only a few conspicuous districts now where silver is the pri- mary object of the mining industry. Some remarks on two of these, Cobalt, Ontario, and Guanajuato, Mexico, are sufficiently interesting to warrant insertion. The present obscure position of silver mining is due to one of the most remarkable economic revolutions in history. In the course of twenty-five years in the latter part of the nineteenth century silver declined in value from $1.30 to about 55 cents per ounce, and in so doing suddenly lost, apparently forever, a posi- tion of importance as the companion of gold that it had held in the estimation of mankind for thousands of years. It is no won- der that such a violent and unprecedented fall astounded the generation that beheld it, and put in play that instinct which attributes any mysterious unpleasant happening to design, and which, in this instance, took the form among the half-informed of an accusation against financiers of a gigantic "conspiracy." It is infinitely more probable that the financiers of the world understood the reasons for the fall of silver as little as other people. It is no part of the present work to offer an explanation ; merely to point it out as the most conspicuous example of a great commodity suddenly taking a price level radically different from its traditional one. 393 394 THE COST OF MINING The comparatively unimportant position now held by silver mines would be very different had not the fall in prices taken place, for with silver at $1.29 an ounce, many of the important mining districts would be more valuable for their silver than for FIG. 21. The drop in value of silver. anything else. The Coeur d'Alenes, Park City, Tintic, and many other districts would be so changed in the relative importance of the metals they produce that they could safely be called silver- mining camps producing lead, gold, and copper as by-products. COBALT DISTRICT, ONTARIO Colbalt is unique not only on account of the geological occur- rence of its ores, but also because it is an example of the absolute inconsequence of high costs per ton in precious metal mining. So far as I know the Cobalt ores are mined at the highest cost of any ores of importance in the world, yet their silver contents are secured at the lowest cost, with the largest margin of profit. The district belongs to the same series of pre-Cambrian rock formations that has proved so prolific in iron, copper, and nickel near the shores of Lake Superior; but at Cobalt the orebodies instead of having the grandiose character so universal in Lake Superior, are exceedingly small, disconnected, and rich. The geological resemblance to Lake Superior extends to the character SILVER MINING AT COBALT AND GUANAJUATO 395 of the surface, which is highly glaciated and covered with swamps and lakes with low rounded knobs of more resistant rocks form- ing occasional eminences above the generally level country. The rocks consist of the ancient greenstone schists, usually called the Keewatin, with some troughs of Huronian quart zites and conglom- erates, the latter invaded by dykes, and sills of biabase. The veins occur in all of the rocks to some extent, but chiefly in the sedimentary formations. FIG. 22. The superficial extent of the district is several thousand acres, but the individual orebodies are so small that they might almost be described as minute. They are usually only from one inch to six inches wide and from a few feet to 150 ft. long, and ordinarily of no great depth. This at least applies to the ore shoots. Some 396 THE COST OF MINING veins that are barren on the surface contain ores at greater depth. While the absolute bottom of the district has not been reached, the hopes of the operators are more fixed on discovering new veins than on following old ones in depth. The vein filling is largely calcite with some quartz. The ore consists largely of native silver, but associated with it are some of the richer sulphides, dyscrasite, argentite, pyrargyrite. With the silver occurs cobalt, nickel, and arsenic in smaltite, niccolite, and other minerals. The problem of mining such ores consists largely in finding them. Once found the principal problem is to extract them cleanly no concentrating process being so efficient for the pur- pose as hand sorting. The ores once secured are shipped to the smelters at a cost for freight, treatment, and deductions of over $50 a ton. But the ores thus mined contain 750 oz. of silver per ton, so that $50 for all treatment charges only means 7 cents an ounce. The cost of mining in the whole district, outside of treatment charges, seems to have averaged about $145 a ton, probably divided about equally between development and extraction. Even this high figure only means 20 cents an ounce. It is almost amusing to speculate on the surprise that a Lake Superior miner must feel at such tremendous costs per ton; nevertheless, there is not the slightest ground for supposing that these high costs do not represent just as good mining practice as any in Lake Superior. It is for the purpose of illustrating this fact that the mines at Cobalt are interesting in a work on the cost of mining. Let us neglect the question of finding ores and assume that it costs $75 a ton to get them out of the ground. What does this mean in comparison with the cost of say $1 a ton for mining the ore at the Wolverine? Simply that it takes seventy-five times as much work to get it out. That this should be so is a direct result of the size and thickness of the orebodies. In the case of the Wolverine the thickness is 15 ft. or 180 in. and the ore is placed on surface for $1 per ton. It is probable that if the orebody were only 4 ft. thick and as continuous as it actually is, the mining cost at the W 7 olverine would be about $2 a ton. Now since an opening 4 ft. wide is about the least that can be made, a cost greater than $2 a ton will be simply an inverse ratio of the actual SILVER MINING AT COBALT AND GUANAJUATO 397 thickness to 4 ft. If the cobalt ore is to cost $75 per ton we might calculate the thickness of it at 48 in. -=- y = 1.28 in. A continuous seam, then, of ore 1.28 in. thick ought to cost $75 a ton for mining. It means exactly the same thing if a series of bunches, averaged up, amount to a mean of 1.28 in. In the light of the figures there is no mystery in the fact that an orebody 1.28 in. thick may be a bonanza. It is worth $400 a ton. If this value were scattered through 4 ft. of a continuous orebody, it would give a value to the whole mass of $11 a ton, equal at average prices to 75 Ib. of copper, which every one would recognize as a bonanza. Such an orebody would give, under the costs prevailing among Lake Superior amygdaloid mines, figures something as follows: Mining per ton $2.00 Surface expense, transportation, and milling 90 Construction and amortization 50 Smelting, refining, and marketing 80 Total $4.20 Cost per pound copper about 5.6 cents. At fifteen-cent copper the profit would be 63 per cent, of the gross value. If we scatter the values through a mass 15 ft. thick, there would be the equivalent of 20 Ib. copper per ton, and the costs would be: Mining $1.00 Surface, expense, transportation, and milling 65 Construction and amortization 30 Smelting, refining, and marketing 22 Total $2J7 Cost per pound copper, 11 cents. Profit on gross value, 27 per cent. In the case of the 4-ft. orebody the costs per ton would be approximately twice as high as in the case of the 15-ft. orebody containing the same copper, but the cost of copper would be only half as great and the profit more than twice as much. This makes it plain enough that the concentration of values is a great economic advantage, 398 THE COST OF MINING In the case of the Cobalt orebody 1.28 in. thick (always neglect- ing the question of prospecting), on the theory of a continuous seam, the results are as follows : Mining per ton $75.00 Smelting and marketing 50.00 Total cost per ton $125.00 Value per ton, $400; profit, 69 per cent. But in Cobalt there is no continuity. The ore must be looked for at an additional cost of $70 a ton so that the actual profit is reduced to 52 per cent. Nevertheless it is quite simple to show that a natural concentration in values involving enormous increases of cost per ton is a distinct economic advantage. RECORD OF COBALT AS A WHOLE Tons Ounces Silver Value 1904-1908 48,545 35,083,300 $19,495,000 9,495,000 Cost per ton = -^JQ-^- = $195 4o,o4o Value per ounce, 55.7 cents Cost per ounce, 27 cents Dividends $10,000,000 1904-1908 8,449 NIPISSING MINE 8,145,834 $4,540,000 n 4 $1,300,000 1C . Cost per ton - ' = 154 $2,640,000 600,000 Cost per ounce, 16 cents NIPISSING MINE, 1908 Tons shipped, 3505; ounces silver, 2,893,931; ounces per ton, 826 Costs Dollars Per Ton Per Ounce, Silver Operation $361,274.85 $105.46 $0.13011 Depreciation 44 631 66 1303 01607 Marketing ore 174,775.66 51.02 .06294 Legal, etc 22 292.51 6 50 00803 Less income $27,761.61 $8.10 $ 01000 Total $575 213 07 $167 91 $0 20715 SILVER MINING AT COBALT AND GUANAJUATO 399 There is good reason to believe that the above figures for 1908 are ample. They include a depreciation charge on plant and buildings of 24 per cent. It appears that the cost of " prospect- ing" " exploration/' and " development " (whatever they may separately mean) amounts to some 37 per cent, of the total cost of " operation. " KERR LAKE MINING COMPANY For the year ending August 31, 1908, this company showed the following record: Tons mined, 528; ounces silver, 1,473,712; ounces per ton, 2790. Costs Per Ton Per Ounce Production and development $139,530 $264.25 $0.0947 Shipping and smelting 76,093 144.30 .0516 General expense 32,904 62.30 .0223 Plant and machinery 57,419 108.75 .0390 Total 305,946 57U44 $0.2076 This is probably a new record for high costs per ton, yet silver was produced for less than 21 cents per ounce and the profit was nearly 70 per cent, of the gross value. Not all of the Cobalt ores are of such high grade, several of the mines being now equipped with mills for concentrating, but the mills only handle a small tonnage and it is safe to say that if Cobalt had to depend on the low-grade ores that it would never have been heard of. GUANAJUATO, MEXICO Guanajuato has the reputation of having been the most productive silver-mining district in the world; its total output exceeding one thousand million ounces. It is the very reverse of the Cobalt district in geological structure, ore deposits, and methods. The rocks, instead of belonging to the ancient Algon- kian series, belong to the comparatively recent Cretaceous. Instead of the multitude of small veins there are four or five very large fault fissures carrying a strong mineralization of quartz and silver sulphides. The mining methods, instead of depending on the careful sorting of small streaks of rich smelting ore, are designed to extract large quantities, and finally, the treatment, instead of being smelting as at Cobalt, is confined almost entirely to cyaniding. In the early days (and by early days I mean the 400 THE COST OF MINING period of more than two hundred and fifty years following 1550, during which an occasional bonanza was discovered) it is probable that Guanajuato bore a much closer resemblance to Cobalt than it does to-day. It is likely that a very large amount of high-grade ore was then mined and that the lower grade ores of the present day have become valuable more because the rich ores of former times are no longer to be had than for any other reason. In other words it is probable that if the high-grade ores of former times were now available the ores being mined at present would not excite much attention. It has often been remarked that Guanajuato bears a close resemblance to the Comstock lode in Nevada, and its history has been similar; but its life has been longer and its output greater. The longer life of the Mexican camp has been chiefly due to the fact that until recently it has not been worked with American appliances and energy, the result being that at Guanajuato, after a life of three hundred and fifty years, the deepest mines have reached a depth of only 2000 ft., while on the Comstock lode explora- tions reached a depth of over 3000 ft. within thirty years after the first discovery. The present mining activity of Guanajuato is chiefly in the hands of Americans and is extremely recent, dating back only to 1904 when it was first satisfactorily demonstrated that the ores could be economically worked by the cyanide process. Since that time the output of the camp has increased very rapidly. It has now reached an annual output of about ten million ounces, divided among some eight or ten producing mines. The average ore is probably worth some $7 or $8 per ton, the values consist- ing of about 13 oz. of silver and .05 oz. of an ounce of gold. The economics of the districts are somewhat as follows: Labor is very cheap and just as poor as it is cheap; miners earning from $1 a day down. There is no evidence here any more than in India or South Africa that low wages means cheap operating. Water-generated electric power has been brought into the dis- trict by American enterprise from a distance of some 110 miles. This power was first used by the mines in 1905 and its introduc- tion proved a great advantage and has much to do with the suc- cess of the mining enterprises. Electric power is sold at $75 per horse-power per year, which is a very moderate price; before its introduction steam power cost some $200 a year, SILVER MINING AT COBALT AND GUANAJUATO 401 ^3 OH O5 iO O rH CM 00 CO GO -* <& o o o 2 % g (N - rH O4 i-H ^ iO O O O5 'O UJ Tjl O5 rH si ^ if S3 IO ? 1 8 1 1 1 1 ' ' 1 ' ' I 1 iO . 1C O T-H (N 00 ^ "t 1 CO 1C 1C O CO (N CO CO CO O O 3 g ^ g O 3 ^ S 5 J i4 1 8 goo 000 ^> 8 1 C/3 oo o 10 Ttl rH CO t^ O5 CO 8 6 6 o o o O5 -^ 1> -i OS d ~ ' iO O O t^* ^^ CO oo t i oo O rH O 5* o o o Tf 1C rH O CO O5 s ^ ' 1^1 S3 8 TTI TJH T}1 o 10 10 C4 C4 l> t^ 00 CO o o ic t^ rH CO TP O ^ o ^o o (N CO O O O 05 Jj rt ffi O O O goo 8 s - S II ^W O (M O i s 8 iO T 1 8 3 Tt< O 8 .> |a *a ^ o i I o ^f o 8 o CO o 8 *, - to'Z3 5 2 3 2 S i> 8 8 8 o 8 1C 8 8 iO s 8 b c _0 E ig gi 1 i i 8 iO 1 1 ^t 1 8 r 1 CO 8 1 i o 8 o 8 U3 CO rH 8 * | | 1C oo i iO CO Cfl o > rH 8 1 ^RUSHINC g E o c^ 8 1 1 i | 3 8 1C 8 o 8 8 10 rH rH 8 | ilsl CO ^f CO 10 C^ O5 CO CO "7) oo o oo 00 (N CO s s s O 00 rH ^ S fc CO rH Tf > -a a h^ RNIA LIBRARY