4. Protection.—Reasonable legislation is needed as a primary basis for protection to the investor. As Mr. John Hays Hammond says, "There should be some drastic legislation on flotation of mining com panies to compel them to publish before flotation, re ports of engineers; to state the price at which prop erties were acquired; amount of the promoter's com mission,. etc., also to compel full monthly and annual reports on financial status, ore reserves, conditions of the lowest developments, etc." Protection at the present time consists in the use of the services of certain types of professional men of adequate scientific (and usually technical school) training. These men are the economic geologists, the mining engineers and the metallurgists. They ad here to definite professional standards and are ani mated by a professional pride.
5. Professional services.—The prospective investor is entitled to expect the benefit of the services of these men. They should be employed by a mining com pany to report upon its position and prospects. A proper examination includes an assay plan, which consists of accurate large-scale maps of ore bodies, with the quantities and the assays of each type of ore carefully calculated on the basis of drill tests and surveying measurements. A detailed estimate of the cost of extraction should be made; and, in addition, there should be a discussion of the economic geology of probable and possible ore, a statement of title and an assurance of the safety of operation with reference to the United States law of the apex.' The examination of a mining proposition may be grouped under four heads: 1, commercial conditions; 2, geological conditions; 3, metallurgical conditions; 4, financial conditions.
6. Commercial projects involving quarrying and coal mining, where the extent of ex ploitable deposits in the country is very great, com mercial conditions will exert an important influence. They may be studied by starting with the established local price of the commodity to be produced, and working back thru a calculation of operating expenses to the margin of profit per unit which may be ex pected. In the case of mining for the precious metals, where the variation in richness of deposit is extreme, commercial conditions will be studied chiefly with re gard to their influence upon operating expenses. The margin above operating expenses will depend more upon the richness of the deposit than upon the market prices. Copper mining is not clearly within either of these classes.
All mineral deposits should properly be valued as stumpage rights are valued by the United States Forestry Service. This is done by fixing a fair local market price for the product, constructing a fair and probable cost of exploitation, adding to this, interest on the capital used and allowances for contingencies, adding also reasonable profits for the operator, and then taking the present worths of the extra annual profits which the calculations indicate as probable during the period of exploitation. The market value
of the stock of a mining project mirrors little of such calculations. It shows chiefly what people in general think, or what the enterprise might be sold out for, if a long and involved stock-marketing cam paign were carried thru to successful completion.
7. Geological this head such matters are included as the chemical form in which the metal exists, the richness of the ore, the zone of sec ondary enrichment, the change of the nature of the ore with depth, the geology of the region, the form of the deposit, the experience of similar mines in the region as to irregularity, permanence, etc., and the quantity of the ore body. Base metal propositions are usually simpler and safer than those involving the precious metals. Bedded deposits and dissemi nated deposits are more easily estimated than vein de posits. The richer the ore the greater the risk, for high values are usually found only in small quantities. The most promising projects are those involving large quantities of low-grade ore. With them exploitation assumes a character similar to that of a manufacturing industry using a mineral raw material. A general rule is that great mines are usually great from the start. Few mines which are poor at the start amount to much later on, for values generally decrease with depth.
If development work has been carried on, and a property is presented as a mine and not as a prospect, the investor is entitled to an estimate of the ore bodies. In good practice this estimate falls into three parts: ore in sight, probable ore and possible ore. "Ore in sight" is so called when it is indicated by workings which lay bare two, three or four sides of it in the earth. The value of the calculation is in direct ratio to the number of sides exposed, and the size of the blocks in which the workings divide the ore. It is of less value as the ore body shows a tendency to make inclusions, to pinch out or to be displaced at fault lines. A fault line is a dislocation caused by the slip ping of rock masses along a plane of fracture. "Probable ore" is the estimate of ore likely to be found for a limited distance beyond the limits of ore in sight on all four sides, and below. "Possible ore" is a calculation based on general indications of other ore within the property limits.