It is of the greatest importance to speculators as well as to investors to study the directorate of a mining company. It is apparent, however, from experience of the past, that this is one of the essentials that they neglect. Looking at it first of all from the speculative point of view, an incompetent and unbusiness-like board multiplies a speculator's risks. There is no calculating what harm such a board of directors might do, not only to the individual company over whose destinies they preside, but to the mining market also. This truth has been amply demonstrated to us of late in the West Australian market, and we know how the latter has frequently been demoralized in consequence. Assuming that we are speculators in West Australian shares, we suffer greatly from the mismanagement of one mine, for it affects the whole of the market, and brings about such a depreciation in all kinds of shares as may last for a prolonged period of time. It seems to be a law that cannot be altered, and therefore it would be wise of us to make eyery provision for its manifold working.

To take a hypothetical instance. A number of very promising West Australian companies are floated, and we purchase lines of shares in each for the purpose of speculating in them. We confine ourselves to this group, say, for a year or two, buying and selling with judicious discernment, and making good profits. The most favourable reports are received from these mines from time to time, they are developing most promisingly; rich reefs are struck, and the assays go many ounces to the ton. The shares keep going up. We sell out, and make a profit, only to buy again when we see better prospects ahead. One of these mines, however, is being grossly mismanaged. The manager, say, is sending home anything but hopeful reports, which the directors suppress. The development of the mine is retarded for want of sufficient working capital, and the manager writes to his directors, giving certain advice and making certain recommendations, which the board do not understand, and to which they pay no heed. Their sole object is to keep up the price of the shares, and they instruct the manager to 'pick out the eyes of the mine,' regardless of the consequences. The manager, mindful only of keeping his situation, obeys his instructions, though knowing full well that the truth will come out one day, and that he might even be made the scapegoat. The directors borrow as much as they can, knowing that reconstruction would only bring down the price of the shares on the market, which they feel must be avoided at all costs. They even order machinery of all kinds, before it is wanted, in order to keep up appearances, not having the foresight to see the disastrous consequences which will ensue when the truth is eventually made known.

No, the price of the shares must be maintained at all costs. And to help do this, and to take much of the burden off their own shoulders and to place it on that of others, they make the usual arrangements to have puffs circulated in various sections of the financial press. They may consider that they are acting in the interests of the shareholders, being far too ignorant to understand the requirements of the mine, and feeling confident, no doubt, that it will go along all right in some fashion or other. Therefore, when we read the reports from the manager, which have been cooked, and the cablegrams, which have received a similar treatment, we hold on tightly both to these shares and to others which we hold, feeling assured that there is nothing alarming or critical in the mine's condition, and that the probabilities are greatly in favour of the price further appreciating. But the truth is suddenly published. The directors see the inevitableness of it. But they break the news to the shareholders as gently as possible. The manager, they say, does not expect the present returns to be kept up during the following month or so, and therefore shareholders must prepare themselves for lesser monthly outputs for a time, The effect of this announcement is greatly to frighten every holder, for they cannot but feel, owing to their past experiences of such things, that there is something more serious behind it. All kinds of rumours are at once put into circulation, and all sorts of motives imputed to the directors. The respectable portion of the financial press especially criticise them severely. A correspondent or a local expert is commissioned by them to visit the mine, but the manager, for obvious reasons, refuses to give him permission to inspect it. There can be but one inference from this, and that an unfavourable one, and the most of it is made by the bears and others. Then follows a serious slump in the shares, for everyone is anxious to sell and few are ready to buy.

But this is not the whole extent of the evil. It adversely affects the whole of the West Australian market, the shares of other companies falling away in sympathy. Everybody looks at it in the worst light. They conclude that there is a conspiracy amongst all the companies, and that they, the investors and speculators, had better 'get out' at the earliest moment. Thus the slump spreads, meaning losses of probably tens of thousands to holders, and it is impossible for the most reassuring reports to stay the panic. Shares that were standing at £10 fall to par, and all the result, you see, of the mismanagement and dishonesty of one board of directors. Such a board, therefore, has brought great losses on us as speculators, whereas if we had had but further knowledge of them we might have escaped those losses by accurately gauging the risks we ran. This is merely one instance out of a varied assortment that could be brought forward as illustrations, but, nevertheless, it is so common a one that it should be sufficient to show the necessity of making ourselves acquainted with the business qualifications of boards of directors of mining companies.