Speculative and Investment Value of Mining Stocks

The question of what value to place on a mining stock is one involving several calculations. A mine is worth the value of the ore it may contain, less the cost of getting the value out, and turning it into money. If the mine being considered is a gold proposition the question of turning the product into money may be disregarded because the product is money. With all other mines the question of converting the product into cash must have serious attention.

A mine may be compared to a treasure vault in which there is money, but how much the owners cannot surely tell, nor have the means of ascertaining with great accuracy, and it would be difficult for them to say what they were worth. So with a mine, it is a treasure vault in which the amount to be obtained is hidden, and there is also an added inconvenience, that each time the treasure vault is opened, each time values are extracted from it, considerable amounts of money must be spent. To such great extent must money be expended that frequently it happens that visits to the treasure vault may, and frequently do, result in expenditures greater than the worth of the materials taken out. What then is the value of an opportunity to take values hidden in the treasure vaults of the earth? Value the opportunity must have, else mining stocks could not be sold, nor would large amounts be expended in making an entrance of shafts and galleries; in seeking after these treasures which are unseen, but which indications promise, the influence is largely speculative; and as the ground to be opened, even in the well established mines, is always an expectation, not a known condition, the element of speculation is present always in a mining enterprise. Even where no ores are known certainly to be present yet where strong geological indications make expectations reasonable, there must be some value. It is a chance to make some money, a chance difficult to reduce to any basis of firm calculation, for if a man felt sure and considered it a demonstrated certainty that he would make a sum of money in a given transaction, a gain of ten per cent, would be sufficient to warrant the undertaking. So in a simple calculation we may assume that a chance to make some money which may be considered secure is worth ninety-one per cent. of the amount involved as a first investment. If the risk increases, the amount of worth for the value of the risk falls lower, and a man who1 would be glad to put out money on good security to gain ten per cent, would hesitate to put out the same money on doubtful security even though the gain, if made, would be twentyfive per cent. Naturally he would ask for special provisions if the risk were taken, and if the profits indicated were very great he might be induced to take a risk to a limited amount of money ; and this is the risk which is taken in the purchase of a mining stock. It is worth something and the rate can to some extent be calculated. If an investor buys a stock on the expectation that it will return him double the money he has risked it is fair to consider that he was willing to put out money on what he thought were good expectations that it would be doubled, and would make for him one hundred per cent., as it is commonly called ; that is double his money. If a stock is bought at onefifth what the investor is led to expect he may obtain, then he takes a risk to recover his money and four times the amount as well, or four hundred per cent, profit, as it is somewhat erroneously called, because a per cent, is a decimal of a hundred and cannot really apply to more than one hundred parts; but it has become a common usage to speak of gains beyond one hundred per cent, and used in this sense one hundred per cent, has come to mean one fold, and five hundred per cent, return is taken at the meaning of five fold return, or five times the amount put out obtained as a profit more than the original investment; and as money has come to be expressed in dollars and hundredths of dollars or per cents., the usage is not inconvenient and as it expresses clearly the meaning one would convey it may be considered a development, not an error, in a language.