VOLUME XXX NO. 7 - Mines Magazine - Colorado School of Mines

neer may assure himself on basis of hisown work. Water supply based onseniority of original claims is an importantlegal phase of nearly everyvaluation, especially if there is to be aconcentrating mill in conjunction withthe mine. Water law is especially importantin our Western States and ifthe engineer is not conversant with it,and often he is not, the problem shouldbe placed in the hands of counsel foropinion.In addition to legal precautions regardingownership of property andrights, there are many laws that affectmining, some of which are of recentorigin. Stream pollution is now anofifense in most states, thus making itnecessary to impound tailings and clarifythe overflow water. The applicationof property taxes and incometaxes, both State and Federal, must beconsidered in any contemplation ofprofit. There are other taxes on salesand purchases, for social security, oldage pensions, unemployment, andworkmen's compensation. In recentnew or revised legislation may add toor subtract from tax burdens or alteremployee-employer relationships. Allof these problems that may affect theexploitation of the property at sometime in its existence must be examinedin the light of experience and contemporarytrends.Finally, the financial problem. Thegeological solution answered the questionof gross present value. Succeedingsolutions or partial solutions answerthe problem of capital investment,probable operating cost andprobable maintenance cost. The answerto this final problem is the answerto the question of feasibility. Thevaluator must decide whether or notthe mine, if under consideration forpurchase or substantial capital outlay,may be reasonably expected to repaythe capital investment plus interestthereon. Usually the anticipated rateof interest is in proportion to the apparentrisk. Because a mine is a wastingasset, because mining, once undertaken,is not susceptible to intermit­of return to attract capital, and insome cases (4) the number of yearsrequired to place the property on production.The formula, the solution ofwhich gives the present day value,gives an answer that is practical onlyinsofar as the solution of the manyproblems I have discussed have beenpractical.In view of the many unknown factors,what is the real value of such animposing program of investigation ?In the first place, the program I havegiven in such brief and unsatisfactoryoutline approaches a maximum. Thedetermination of what to include, exclude,stress or slight, must rest withthe examining engineer and his decisionswill be based upon (1) thepurpose of the valuation, (2) the presentand potential character of the property.(3) the ability of his employerto follow his recommendations, (4)the anticipated value of his report, and(5) experience. The engineer will attemptto competently ascertain {1)the gross value of reasonably assuredTheoooo^'GtOP uvs\cstest was not successful. It is pertinentin this connection that this gentlemanfailed to keep an appointment witbDr. Heiiand for an inspection of hisinstrument.Buzz came on the stage a little toosoon. As is well known, at thepresenttime, in the widely used reflectionmethod of seismic prospecting wavessent into the ground from the explosionof a very small charge of dynamite.^These are timed to an accuracyof 1/1000 of a second as theyare reflected back from horizons severalthousand feet below the surface.It is thus possible, since the speed oftravel of these waves is known, toquite accurately ( ± 0.5 of 1% ofthe depth) determine the depth to thereflectingbed.The story of the Buzzascope bringsout the point that almost anyone witha new instrument or a new explorationmethod can obtain a bearing andusually get backing and endorsementif he will submit to impartial tests byqualifiedparties.years new Federal and State laws havebeen passed which govern wages andhours, labor relations, unemploymentcompensation and old age payments,security laws regulating offerings oftent operation, because mining is acapital goods or heavy industry, andbecause mineral products, except bylaw or cartel agreement, are subjectto and responsive to the vagaries ofresei'ves, (2) the possibilities of futurediscoveries, (3) the overall cost ofrealization, and (4) the probablevalue of the product or products.Thus the valuation program is impos­ByD A R T W A N T L A N D , M.Sc, '36Assistant Professor ofGeophysicsAftcn a charge Q\ % o\ a stick or less of 60%dynamite is used.securities, fair trade practices, andsupply and demand, imposing prob­ing only in proportion to the characterColorado School ofMinesmany others, all of which must be con­lems face the engineer. In effect, heof the proposed program ofsubsequentsidered in any problem of valuation.The social problem, using social inits inclusive meaning, is becoming increasinglyimportant. It is under thistitle that I shall consider the cost oflabor and its importance in the problemof valuation. Labor, as I havesaid, enters into every step from thefirst step in exploitation until somefinished article reaches a final restingplace. The problem for the valuatordecreases, however, as the valuableproduct gets further and further awayfrom the mine.Of paramount importance underthis title is the subject of management.From his own experience the examiningengineer must estimate the capabilitiesof future management for efficiencyin operation, leadership (for amine is often isolated), and capabilitiesin the art of exploration. Fromhis own experience he must estimatethc productive capabilities of skilledand unskilled labor translated intotons per man shift, feet per shift, andthen into dollars. In times of flux,such as the present time, he must con­must arrive at some conclusion on thevalue of today's doliar tomorrow andtomorrow's dollar today. T o do thishe must consider the past and presenthistory of the dollar in the many functionsunder review. O n this basis, andseasoned with his own good judgment,he must express an opinion in regardto the future cost of exploration anddevelopment, of labor and materialcosts, of taxes and premiums designedto promote the individual security oflabor, and of property and incometaxation. He must also express anopinion in regard to the future valueof the product or products, the futuretrends in consumption, the possibilitiesof replacement by or displacementof other products, the product's competitiveposition, and of the effect ofthe secondary or scrap market. Thereare many other considerations. Theresult, whether itemized or includedin a final figure, should be an expressionof the degree of feasibility. Thestudy may he brief or exhaustive, hutits quality should bear some relationto the expected investment and the lifeof the property.action. In the second place, it doesplace a dollar value on tangible andintangible resources of value by meansof a method of valuation that has inpractice proved to be superior to others.Finally, although there are manyunknowns that cannot be reduced toprecise determinations, nevertheless therational extension of accurate informationand the reasonable interpretationof human activity are in the longrun our best criteria of the future.In closing, I should like to emphasizean opinion that the increasingavailability of tools for interpretationof ore possibilities will coincide withdemands for their practical application.In early days, outcrops, grassroot orebodies, and abundant speculativemoney that paid for the drivingof random holes into attractive hillsidesresulted in the discovery of mostif not all of our mining districts. Theproduction from these districts increasedrapidly and with few exceptionsconsumotion kept pace. Todaythose easih'^ discovered occurrenceshave been well worked over, like thePartThenBuzzascopeIn the early history of the Westthere wasn't much differencebetweenthe shootings of the quick fingeredDeputy Sheriff and the quickfingeredoutlaw as far as the victim was concerned,as the life of "Billy the K i d "shows. In like manner there is, attimes, a very thin line between whatis sound and legitimate in a prospectinginstrument and what is a doodlebugfor the uninformed investor.A borderline case along this linewas that of the Buzzascope^ whichblossomed in ahout 1927. M r . Buzzwith his Buzzascope undeniably hadgood proposition if it worked. In theoperation of this instrument beawouldshoot off a pistol in a can, set into theground, and attempt to record thetime of travel of the energy thus sentinto the earth as it was reflected fromrock strata below. In this procedureBuzz, no doubt, took his idea fromdeep sea echo sounding methods;widely used in oceanographic surveys.He was successful in obtaining a hear­-1 nf-sider the possibilities of increased de­better kernels in a dish of popcorn.ing and in interesting several of themands regarding wages, working hoursand conditions, and living conditions.Other social problems are nationalor international in character. Thecomparatively free flow of goods ininternational trade has been upset byrecent surges of nationalism. Now wehave wars, declared and undeclared,in many parts of the world. A t homeNo discussion of valuation is consideredcompetent without mention ofthe Hoskold annuity formula. Briefly,it is a formula that provides a mathematicalsolution to the valuation afterthe participating factors have been determined.These factors are (1) expectednet yearly profit; (2) expectedlife of the property; (3) required rateH a d the present development of thehuman race transpired ten thousandvears later, other outcrops now unknownwould have been exposed.These undiscovered orebodies whichare undoubtedly more abundant thanthose we now see, are the reserves ofthe future.(Continued on page 366)officials of oil companies who at thattime had oifices in the First NationalBank Building of Denver. A test ofhis machine was arranged for at theFt. Collins oil field. A number ofcompany geologists and some of theseofficials went out with M r . Buzz towitness the trial of his device. The^ This name fictitious for obvious reasons.M O D t K N b C l h N "WITH G E O P H Y S I C A L M E T H O l \ . J342 THE MINES MAGAZINE > JULY 1940THE MINES MAGAZINE ^ JULY 1940343