Such companies usually distribute their dividends in the way of scrip, and shareholders, for some reason or other, probably because they know no better, seem invariably satisfied with these, especially as they may enhance the price of the shares on the market. But this scrip, in the majority of cases, is absolutely worthless. It is very easy to manufacture such scrip, and it acts as a very good 'sop' when such companies have nothing in the way of solid cash to give the shareholders.

I should say myself that no mining company ought to be floated with a working capital of less than £30,000, and more often it should be quite £50,000, especially if there is any shaft to be sunk to a fairly good depth. But even this may be entirely inadequate to do all the necessary development work, so that to be within the region of safety, and to prevent recourse to reconstruction, £75,000 to £100,000 ought to be spent upon the mine, though even then more capital may ultimately be needed. But, as I have said, it will vary in individual cases, and no rigid rule can be laid down to suit every case. For instance, if it be unproved ground, and only a trial-shaft has been sunk, or only a bore-hole put in here and there, more capital will be needed than in the case of a mine that has been already partially opened up. And so calculations must be made intelligently, and with the help of common-sense.

Another point to be considered is, as I have already pointed out, the area and extent of the property. Should the area be a very small one, say from 12 to 24 acres, it is not likely to crush any large amount of ore per month before it is worked out, and therefore the profits will not only be small, but the mine will be short-lived. The larger the area, therefore, the greater the returns and the profits ought to be, and the longer it will take to work out. But an area may be large, and yet altogether valueless as far as profit-earning may be concerned, for the reefs traversing it may be small and poor. Therefore the size and value of the reefs ought also to be taken into consideration. But even circumstances may differ greatly in these respects. A small area may yield vastly greater profits and have a longer life than large areas, so vitally dependent are they upon the number and quality of the reefs that may be found within them. Some small properties, especially in West Australia, are traversed by quite a network of small reefs, and hence they make enormous returns and make the fortunes of the original shareholders who invested their money in them.

Another important matter is to find out the dip of the reef, as a small property may contain as great an amount of ore as one with a more extensive area, should the dip of the reef in the former be more vertical than that in the latter, meaning that it can be worked down to a great depth before it runs into the neighbouring property, whilst in the second case the reef may so flatten as to reach the boundary line at quite a shallow depth, and therefore be quite lost to the company working it. Thus, if we know the dip of a reef, it is knowledge that will be of the greatest use to us both in our speculations and investments. For instance, if a company is sinking a shaft to cut a reef at a certain depth, we may make a profit by calculating the depth at which it should be cut, by buying the shares at a low price and selling again when the price goes up, on the striking of the reef. Should the reef be a very rich one and still going down vertically, we may hold on for a considerable time and make a more handsome profit still, or we may hold the shares as an investment for the dividends the mine will yield.

Mine No. 1.

Mine No. 1.

Mine No. 2.

Mine No. 2. A, surface; B, boundary lines; C, vertical reef going to unknown depth; D, neighbouring properties; E, country rock; F, angle of reef dipping at shallow depth into neighbouring mine.

Therefore, there are a great many points which the investor and the speculator should study if he desires to minimize his risks and make his success as certain as it can be. To assist him in understanding what I mean by the dip of a reef, I have sketched out the two foregoing diagrams, which I hope he will find lucid enough.