It is well known that the economical evaluation of a large number of prospecting ventures or partially developed low grade gold deposits is critical. The risks in such enterprises amount to the possible loss of the whole investment, and the possible returns must consequently be commensurate. Such business is therefore necessarily highly speculative, but not unjustifiable, as the whole history of the industry attests; but this makes the matter no easier for the geologist and metallurgist. Many devices of financial procedure assist in the limitation of the sum risked, and offer a middle course to the investor between purchase of a wholly prospective value and the loss of a possible opportunity to profit by it.
The usual form is an option to buy the property after a period which permits a certain amount of development work (e.g. geology, metallurgical tests) by the purchaser before final decision as to purchase. Aside from young mines such enterprises often arise from the possibility of lateral extension of the ore-deposit outside the boundaries of the property of original discovery, in which cases there is often no visible ore within the property under consideration upon which to found opinion. In regions where vertical side lines obtain, there is always the possibility of a deep level in inclined gold deposits. Therefore the ground surrounding known deposits has a certain speculative value, upon which engineers are often called to pass judgment. Except in such unusual occurrences as South African bankets, or low grade gold-copper deposits, prospecting for deep level of extension is also a highly speculative phase of mining.
The whole basis of opinion in both classes of ventures must be the few geological weights, the geology of the property and the district, the development of surrounding mines, treatment process, and metallurgical losses. In any event, there is a very great percentage of risk, and the profit to be gained by success must be, proportionally to the expenditure involved, very large. It is no case for calculating amortization and other refinements. It is one where several hundreds or thousands of per cent hoped for on the investment is the only justification. The system has produced an increasing class of gold mining speculators and investors who are finding and supplying the enormous sums required to work gold mines, sums beyond the reach of the imagination. Every year the gold mining investors of the new order are coming more and more to the engineer for advice, and they should be encouraged, because such counsel can be given within limits, and these limits tend to place the industry upon a sounder footing of ownership.
The engineer's interest is important so that the industry which concerns his own life-work may be in honorable repute, and that capital may be readily forthcoming for its expansion. Moreover, by constant advice to the investor as to what constitutes a properly presented and managed project, the arrangement of such proper presentation and management will tend to become an a priori function of the promoter. Sometimes the engineer can make a short visit to the mine for data purposes, more often he cannot. In the former case, he can resolve for himself an approximation upon all the factors bearing on value, except the quality of the ore. For this, aside from inspection of the ore itself, a look at the plans is usually enlightening. A longitudinal section of the mine showing a continuous shortening of the stopes with each succeeding level carries its own interpretation. In the main, the current record of past production and estimates of the management as to ore reserves, etc., can be accepted in ratio to the confidence that can be placed in the men who present them. It then becomes a case of judgment of men and things, and here no rule applies. Advice must often be given upon data alone, without inspection of the mine. Most mining data present internal evidence as to credibility.