CHAPTER XVIII.

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ADMINISTRATION (Concluded).

ADMINISTRATIVE REPORTS.

In addition to financial returns showing the monthly receipts, expenditures, and working costs, there must be in proper administration periodic reports from the officers of the mine to the owners or directors as to the physical progress of the enterprise. Such reports must embrace details of ore extraction, metal contents, treatment recoveries, construction of equipment, and the results of underground development. The value of mines is so much affected by the monthly or even daily result of exploration that reports of such work are needed very frequently,—weekly or even daily if critical work is in progress. These reports must show the width, length, and value of the ore disclosed.

The tangible result of development work is the tonnage and grade of ore opened up. How often this stock-taking should take place is much dependent upon the character of the ore. The result of exploration in irregular ore-bodies often does not, over short periods, show anything tangible in definite measurable tonnage, but at least annually the ore reserve can be estimated.

In mines owned by companies, the question arises almost daily as to how much of and how often the above information should be placed before stockholders (and therefore the public) by the directors. In a general way, any company whose shares are offered on the stock exchange is indirectly inviting the public to become partners in the business, and these partners are entitled to all the information which affects the value of their property and are entitled to it promptly. Moreover, mining is a business where competition is so obscure and so much a matter of indifference, that suppression of important facts in documents for public circulation has no justification. On the other hand, both the technical progress of the industry and its position in public esteem demand the fullest disclosure and greatest care in preparation of reports. Most stockholders' ignorance of mining technology and of details of their particular mine demands a great deal of care and discretion in the preparation of these public reports that they may not be misled. Development results may mean little or much, depending upon the location of the work done in relation to the ore-bodies, etc., and this should be clearly set forth.

The best opportunity of clear, well-balanced statements lies in the preparation of the annual report and accounts. Such reports are of three parts:—

1. The "profit and loss" account, or the "revenue account."
2. The balance sheet; that is, the assets and liabilities statement.
3. The reports of the directors, manager, and consulting engineer.

The first two items are largely matters of bookkeeping. They or the report should show the working costs per ton for the year. What must be here included in costs is easier of determination than in the detailed monthly cost sheets of the administration; for at the annual review, it is not difficult to assess the amount chargeable to development. Equipment expenditure, however, presents an annual difficulty, for, as said, the distribution of this item is a factor of the life of the mine, and that is unknown. If such a plant has been paid for out of the earnings, there is no object in carrying it on the company's books as an asset, and most well-conducted companies write it off at once. On the other hand, where the plant is paid for out of capital provided for the purpose, even to write off depreciation means that a corresponding sum of cash must be held in the company's treasury in order to balance the accounts,—in other words, depreciation in such an instance becomes a return of capital. The question then is one of policy in the company's finance, and in neither case is it a matter which can be brought into working costs and leave them any value for comparative purposes. Indeed, the true cost of working the ore from any mine can only be told when the mine is exhausted; then the dividends can be subtracted from the capital sunk and metal sold, and the difference divided over the total tonnage produced.

The third section of the report affords wide scope for the best efforts of the administration. This portion of the report falls into three divisions: (a) the construction and equipment work of the year, (b) the ore extraction and treatment, and (c) the results of development work.

The first requires a statement of the plant constructed, its object and accomplishment; the second a disclosure of tonnage produced, values, metallurgical and mechanical efficiency. The third is of the utmost importance to the stockholder, and is the one most often disregarded and obscured. Upon this hinges the value of the property. There is no reason why, with plans and simplicity of terms, such reports cannot be presented in a manner from which the novice can judge of the intrinsic position of the property. A statement of the tonnage of ore-reserves and their value, or of the number of years' supply of the current output, together with details of ore disclosed in development work, and the working costs, give the ground data upon which any stockholder who takes interest in his investment may judge for himself. Failure to provide such data will some day be understood by the investing public as a prima facie index of either incapacity or villainy. By the insistence of the many engineers in administration of mines upon the publication of such data, and by the insistence of other engineers upon such data for their clients before investment, and by the exposure of the delinquents in the press, a more practicable "protection of investors" can be reached than by years of academic discussion.

                                                                                                                                                                                                                                                                                                           

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