Show THE VALUATION OF MINING STOCKS our attention has been called to statements appearing in the local press to the dollar a share paying one effect that persons for a certain stock when w hen the company was incorporated have come out well wel 1 the company in question was the consolidated mercur c ur organized in august 1900 with shares par value one dollar the statement ent a averred that the company had paid in dividends or the equivalent of per share therefore a buyer at par had a fine investment also that persons buying in 1901 at around had lost but little this company is an ail excellent source for figuring the value of stock its life is e ended the tonnage produced is known the amount and dates of dividends can be ascertained dividends were in fact all told but 1265 the error was made in including dividends paid by the constituent companies before the consolidation but it is obvious that the buyer of consolidated mercur stock got none of this money he got 1265 a share now just what was that stock worth to the prospective buyer at the time the company was formed if the buyer could have foreseen the tonnage treated the life of the mine and the profits or dividends per share he would have been in a position to figure assuming the life of the property to be thirteen years which it was approximately that eight per is a fair return on gold mining tock stock s and we believe eight per cent to be too low and considering the fact that when a mine is exhausted the capital must be wiped out and providing a sinking fund to be invested at four per cent compounded to extinguish the cap capital tali we find that the value of the stock in 1900 was 70 cents a share inasmuch as all but six cents of this dividend was paid in seven years and figuring seven years as the life the valuation is higher namely about 85 cents a share again the company had paid in three years a share on this basis the stock was worth about a share so the cold facts are that a purchaser of this stock at any figure above cents a share would have done in much ch better to have invested in 4 per cent bonds at par this does not mean dinean however that the purchaser may not have been justified fu stifled in paying more the ore reserves had had not then been exposed to the light of day the profits could only be estimated and there was justification fi in the capitalization of a certain portion of the buyers hopes events have proved that the buyers hopes were too heavily capitalized aside from the above consideration the properties controlled by the consolidated ConsolidAte a mercur have been the source of great profits to those who were early stockholders as is being demonstrated in the series of articles now running in the mining review the record of the mercur properties them selves remains great the true condition shown in the above is paralleled in the valuation of many stocks of mines now operating there are ma man of them overvalued over valued today Is not this one of the principal reasons for the slump in the mining share market while the price of stock is determined by the bid and asked quotations its value is not so determined the investor should make a cold analysis sis of the proposition find as near as possible si ble the ascertainable value and then with this as a basis capitalize his hopes for as much additional as his optimism will allow |