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OCT l j 1918 



The 

GOLD INDUSTRY AND 
GOLD STANDARD 



By HENNEN JENNINGS 

CONSULTING ENGINEER OF THE UNITED STATES 
BUREAU OF MINES 



THE 
GOLD INDUSTRY AND GOLD STANDARD 

By HENNEN JENNINGS 

CONSULTING ENGINEER OP THE UNITED STATES BUREAU OF MINES 



G,S\4- ill/ 



> »• 



\^(x ■ 






The GOLD INDUSTRY AND GOLD STANDARD 

By Hennen Jennings 

Consulting Engineer of the United States Bureau of Mines 



GOLD attracted the attention of primitive man by its color, 
lustre and indestructibility* 
The earliest mining and metallurgical operations of which 
traces remain were those in Egypt that dealt with the ores of gold. 
From pictorial rock carvings in upper Egypt, as also from Egyptian 
hieroglyphics, it is found that the search, desire, and use of gold ex- 
tended back some 3000 to 4000 years before the Christian era. 

Starting with use as an ornament, gold soon became the trading 
counter and has been an emblem of value to the human race as far 
back as history extends. Appreciation of the value of gold has been 
maintained through the centuries by the difficulties connected with 
obtaining the metal. 

With early primitive methods, only the gold most abundant and 
easily worked and visible was first sought and this was found prin- 
cipally in alluvial deposits, but as knowledge, mechanical skill and 
tools and appliances were developed by the human race gold mining 
was extended to more difficult alluvial, vein, and lode deposits. 

Gold, when it became the counter of trade and a measure of pos- 
session, was the most eagerly sought of all possessions, and thus it be- 
came the pioneer and stimulant in mining, metallurgy and chemistry. 
The search for this precious metal became so intense that the alche- 
mists sought its transmutation from other metals, which, though they 
failed to accomplish, won them other knowledge and gave birth to 
chemistry. 

The trading value of gold has been stabilized by history in that no 
superabundance was ever obtainable and it has always been necessary 
to expend labor and intelligence to an extent largely commensurate 
to the bartering value of the gold obtained. 

Accurate records do not exist of the actual outputs of gold in 
early times, but certainly they must have been small from a modern 
standpoint. Great outputs of gold, as of all other minerals, are a 
matter of recent times. 



384486 



Gold Output of the World 

It has been officially estimated that the world production of gold 
since the discovery of America, in 1492, to the end of 1916, a period 
of 424 years, was $16,601,641,319. The output since 1894, a period 
of 23 years, was approximately $8,500,000,000, or slightly more than 
50 per cent of the total amount mined in 424 years. The average 
yearly production up to 1894 was $19,107,644, while, since 1894 to 
date it has averaged $369,565,217 per year. 

The available gold on hand as gold reserve in 1894 has been esti- 
mated at $3,965,900,000. The loss of gold and its absorption in the 
arts and manufacture of jewelry accounts for the difference between 
the amount produced and the amount on hand. 

The amount of gold used in the arts has increased since 1894, and 
of late years it has been between $50,000,000 and $100,000,000 a year. 
Estimating the consumption and loss of gold since 1894 at $2,000,- 
000,000 the amount of gold at present on hand as gold reserve may be 
roughly estimated at $10,500,000,000. 

The concentration and portability of this wealth can be ap- 
preciated by converting it into tons weight, for the total weight of 
the entire gold reserve of the world does not amount to over 17,000 

tons and it could be easily transported around the world in one of the 
largest steamships. 

Gold, as also silver, have advantages as money counters owing 
to large value in small volume, ease of transportation, divisibility 
without loss, beauty, brilliant lustre, great durability, ease with which 
they can be guarded, and the difficulty of counterfeiting. 

The province of the various mints of the world is to give guarantee 
of the weights and fineness of the gold they coin. The United States 
dollar contains 23.22 grains of gold and 2.58 grains of alloy, making 
a total weight of 25.8 grains, or 1.677 grammes, and its fineness is 
900. Gold coins of all nations, under normal conditions, are ex- 
changeable on the basis of their fine gold content. 

Gold Output a Measure of Industrial Progress 

A broad outlook on modern mining and a study of the output 
curves of metals since the discovery of gold in California, in 1848; 
Australia, 1851; and Transvaal, 1886 — indicate that big mining is 
surprisingly modern and that great outputs of other minerals have been 
pioneered by gold. Until the last few years, gold outputs have shown 
a parallelism with those of coal, iron and copper; with the growth of 

4 



railways, and the deposits in our banks. It would seem that the 
outputs of coal during the last 18 or 20 years; iron, 15 years; copper, 
13; and petroleum, 11, — were greater in aggregate than the output of 
these minerals for all previous history. 

The mineral outputs of modern times have been possible only 
by the advances made in invention, engineering, chemistry and busi- 
ness organization. Even so, it would now appear that the gold out- 
put of the world has about reached its zenith, and is giving indications of 
future decline, as shown by the returns for the past ten years, as under: 

1908 $442,476,900 1913 $459,941,100 

1909 454,059,100 1914 455,705,000 

1910 455,239,100 1915 468,724,918 

1911 461,939,700 1916 457,006,045 

1912 466,136,100 1917 430,000,000 (est.) 

The extreme variation of outputs during this period is not great, 
but on the basis of the estimate for 1917, a drop of 6 per cent from 
the previous year is seen. 

The following table gives the gold returns from all countries of 
the world from 1912 to 1916, inclusive, with relative percentages for 
the pre-war year 1913. 

WORLD'S PRODUCTION OF GOLD, 1912 TO 1916, INCLUSIVE 
(Compiled from the reports of the Director of the Mint, U. S. Treasury Department.) 





1912 


1913 j 


Per 

cent 


1914 


1915 


1916 


North America: 
United States . . 

Canada 

Mexico 

Central American 
States 

South America: 
Argentina . . . 
Bolivia and 

Chile 

Brazil 


$93,451,500 
12,648,800 
24,500,000 

3,030,400 

107,300 

175,000 
3,570,600 
2,971,700 
406,500 
492 , 200 
111,000 

879,800 

407,300 

3,050,600 

623,500 

2,043,200 


$88,884,400 
16,598,900 
19,308,800 

2,721,700 

2,600 

175,000 

2,254,700 

2,971,700 

406,500 

492,300 

29,900 

1,353,500 
470,400 

3,050,600 
444,800 

2,179,300 

900 

2,127,400 

135,600 


19.3 
3.6 
4.2 

.6 

.0 

.0 
.5 
.6 
.1 
.1 
.0 

.3 
.1 
.7 
.1 

.5 
.0 
.5 
.0 


$94,531,800 
15,925,000 
19,308,800 

2,293,800 

2,600 

175,000 

2,698,200 

4,678,600 

406,500 

492,300 

29,900 

1,126,500 
503,400 

3,050,600 
444,800 

2,179,300 

900 

2,127,400 

135,600 


$101,035,700 

18,977,901 

6,559,275 

2,970,271 


$92,590,300 

19,234,976 

7,690,707 

3,517,597 

6,330 

396,922 
2,424,515 


814,418 
2,424,515 
5,453,148 

545,674 

1,109,891 

11,836 

923,892 

449,054 

1,959,793 

1,395,349 

1,392,465 


Colombia 

Peru 


6,173,867 

545,674 

1,179,537 


Guiana: 

British 

Dutch 

French 

Europe: 
Austria-Hungary 
Finland 


11,836 

767,525 

438,223 

1,959,793 

1,424,930 

1,392,465 


France 

Germany 


1,812,100 
78,100 


1,400,000 


1,000,000 







world's production of gold — continued 



1912 



1913 



Per 
cent 



1914 



1915 



1916 



Great Britain. 

Greece 

Italy 

Norway 

Portugal 

Russia 

Servia 

Spain 

Sweden 

Turkey 



$ 27,800 



$ 17,900 



11,000 



17,200 



2,300 

22,199,000 

251,100 



2,300 

26,507,800 

328,000 



20,300 
500 



Australia : 

British New 
Guinea. . . . 

New South 
Wales 

Northern Terri- 
tory 

Queensland .... 

South Australia 

Victoria 

Western Aus- 
tralia 

New Zealand. . . 

Tasmania 



Asia: 

British India. . . 

China 

Chosen (Korea) 

East Indies: 

British 

Dutch 

Federated Ma- 
lay States . . . 

Formosa (Tai- 
wan) 

Indo-China. . 

Japan 

Siam 



Africa : 

Abyssinia 

Belgian Congo 

Egypt • 

French Colonies 
French East Af- 



3,416,900 

110,300 
7,192,700 

136,300 
9,925,200 

26,514,900 

6,428,100 

785,000 

11,055,700 
3,658,900 
2,852,600 

1,352,000 
3,387,100 



74,700 

4,467,000 

56,500 



East 



nca. . 

German 

Africa 

Madagascar. . . 

Rhodesia 

Sudan 

Transvaal, Cape 
Colony and 
Natal 

West Africa 
(Nigeria, 
Gambia, Gold 
Coast, and 
Sierra Leone) 



Total . 



2,044,600 



14,226,900 



188,293,100 



7,286,000 



$466,136,100 



17,600 
500 



377,200 

3,093,200 

64,500 

5,493,200 

135,500 

8,990,800 

27,165,700 

7,102,700 

690,400 

12,178,000 
3,658,900 
3,582,500 

1,352,000 
3,387,100 

282,400 

814,600 

74,700 

3,614,400 

56,500 

497,200 

916,600 

95,100 



253,200 

1,256,200 

14,274,700 

192,700 



181,885,500 



7,955,300 



$459,941,100 



.0 
.0 
.0 
.0 
.0 

;.8 
.i 

.0 
.0 
.0 



.1 

.7 

.0 
1.2 

.0 
1.9 

5.9 
1.5 

.2 

2.6 

.8 
.8 

.3 
.7 

.1 

.2 
.0 
.8 
.0 

.1 

.2 
.0 
.0 

.0 

.1 

.3 

3.1 

.1 



39.5 



1.7 



100.00 



17,900 



$ 19,266 



$ 19,142 



31,100 



2,295 



2,295 



2,300 

28,587,000 

116,000 



661 
26,322,746 



661 
26,322,746 



17,600 
500 



377,200 

2,573,800 

52,300 

5,134,800 

129,200 

8,541,900 

25,487,800 

3,870,700 

542,500 

11,378,400 
3,658,900 
3,306,600 

1,352,000 
3,387,100 

269,100 

814,600 

74,700 

3,614,400 

56,500 



497,200 
916,600 
126,800 



25,323 
475 



25,323 



253,200 

1,075,900 

17,423,100 

242,800 



173,560,000 



8,075,100 



2,738,958 

20,351 

5,161,911 

125,701 

6,802,359 

25,014,928 

8,740,567 

383,402 

11,522,457 
2,804,692 
3,739,477 

3,100,000 

351,527 

1,143,017 

43,659 

5,386,06e 



1,029,189 
144,910 



43,414 



1,381,354 
18,915,324 



$455,676,600 



188,033,156 



8,304,551 



2,235,556 

17,281 
4,447,793 

86,399 
5,305,282 

21,941,044 

6,048,992 

326,408 

11,206,509 
2,804,692 
4,122,351 

3,100,000 

327,871 

1,001,178 

65,620 

5,386,066 



1,029,189 
144,910 



43,414 



964,980 
19,232,165 



192,182,902 



7,860,079 



$468,724,918 $457,006,045 



Note. — The percentages given are based on the 1913 production with normal mining con- 
ditions, when the Allies produced 91.3 per cent; the Central Powers .6 per cent and the Neutral 
countries 8.1 per cent. 



The table shows that gold has been mined in about 60 different 
countries, and in all the continents of the world. It has been found in 
the oldest rocks and thus in almost all subsequent geological forma- 
tions. Traces of gold have been proven to exist in sea water, so the 
distribution of gold is most widely spread, but never in great quantity 
compared to other metals. Exceptional occurrence and favorable natur- 
al and commercial conditions are required for its profitable extraction. 

Gold Output of Warring Nations 

The relative production of gold from all countries are given in 
percentages for the pre-war year 1913, and on a war basis they can be 
classified as, Allies, Central Powers, and Neutrals, with percentages 
as follows: Allies, 91.3%; Central Powers, .6%; Neutrals, 8.1%. 
Of the Allies, it is seen that Great Britain, with her colonies and de- 
pendencies, produced 62.6%; United States, 19.3%; and Russia,5.8%. 

The main gold producers of the world rank in order thus: Trans- 
vaal, United States, Australia, Russia, Canada, and Rhodesia. 

Australia's gold output from 1851 to 1903 amounted to approxi- 
mately $2,060,000,000. The output in 1903 was about $87,000,000 
and since then production has decreased gradually until in 1916 it 
amounted to only about $39,000,000, or 45 per cent of the produc- 
tion in 1903. There is at present no indication of any large increase 
of output in the future. 

The Candian gold output was very small in 1891, but mounted 
rapidly until 1900, when the Yukon placer workings seemed to have 
reached their maximum; in that year the Canadian fields produced 
$28,000,000. Since 1900 there has been a fluctuating downward 
tendency. The years 1915 and 1916, however, showed some increase; 
the production for 1915 was $18,977,901 and that for 1916— 
$19,234,976. The war conditions are unfavorable for exploitation or 
search for new discovery. The extent of territory and natural con- 
ditions, however, are such as to give hope of greater future outputs. 

Russia's gold statistics are open to doubt. It would appear that 
gold has been worked in the Ural district since 1820 and that in the 
last 12 or 13 years outputs have varied from $35,000,000 to $22,000,- 
000 a year. Some engineers express the belief that Siberia has greater 
possibilities for future discovery and exploitation of gold, as also of 
other metals, than any other field in the world. At present, in view 
of war and industrial conditions, the prospect of large outputs of 
gold in the immediate future is uncertain. 

7 



The South American and Central American Fields 
Of these fields, Mexico is the most important. The revival of 
gold mining commenced with a very small output in 1890 and the 
maximum production was reached in 1911, with an output of 
$29,200,000. Owing to revolution in that country, the output 
in 1916 dropped to $7,690,707, which was a million dollars increase 
over 1915. When the country is in better political and economical 
condition, there is good ground for hoping for increased returns. 

In other sections of Central and South America the outputs have 
not been large, but there yet remain large stretches of unexploited terri- 
tory and abandoned properties which may be found profitable to work. 
The following tabulated statement for the Transvaal is given in 
full, as it is the most complete record of gold mining operations in the 
world. The yields, working costs and dividends, from 1887 to 1916, 
a period of 30 years, have been obtained by sworn statements to both 
Boer and British Governments. 

THE WITWATERSRAND GOLD MINING INDUSTRY'S PROGRESS 





Tons 
milled 


Yield 


Working costs 


Dividends 
£ 




Year 


Total 
£ 


Per ton 
s. d. 


Total 

£ 


Per ton 
s. d. 


Year 


1887 


25,000 

250,000 

575,000 

702,825 

1,175,465 

1,921,260 

2,215,413 

2,830,885 

3,456,575 

4,011,697 

5,325,355 

7,331,446 

6,639,355 

692,413 

412,006 

3,416,813 

6,105,016 

8,058,295 

11,160,422 

13,571,554 

15,523,229 

18,196,589 

20,543,759 

21,432,541 

23,888,258 

25,486,361 

25,628,432 

25,701,954 

28,314,539 

28,525,252 


81,045 

729,715 

1,300,514 

1,735,491 

2,556,328 

4,297,610 

5,187,206 

6,963,100 

7,840,779 

7,864,341 

10,583,616 

15,141,376 

14,093,363 

2,484,247 

1,014,687 

7,179,074 

12,146,307 

15,520,329 

19,991,658 

23,615,400 

26,421,837 

28,810,393 

29,900,359 

30,703,912 

33,543,479 

37,182,795 

35,812,605 

34,124,434 

37,264,992 

38,107,909 








12,976 

109,050 

430,666 

254,551 

334,698 

879,320 

955,358 

1,527,284 

2,046,852 

1,513,682 

2,707,181 

4,848,238 

2,946,358 


1887 


1888 








1888 


1889 








1889 


1890 

1891 

1892 

1893 

1894 

1895 

1896 

1897 

1898 

1899 

1900 


49 4 

43 5 

44 7J 
47 
49 2 

45 4 
39 3 
39 7 

41 3 

42 3 

49 2i 
42 
39 8 
38 6 
35 10 
34 6 
33 11 
31 5 
28 11 

28 6 
27 11 

29 
27 9 
26 6 
26 3 
26 8 


1,480,940 

2,221,630 

3,418,290 

4,231,848 

5,435,816 

5,793,927 

6,350,659 

7,876,435 

10,293,138 

11,606,968 

2,590,523 

598,874 

5,057,948 

8,800,805 

11,664,359 

15,237,309 

18,049,431 

19,499,417 

20,273,620 

21,361,891 

19,487,807 

22,127,618 

24,504,700 

22,919,871 

21,943,692 

24,657,659 

25,763,270 


42 1J 

37 10 
35 6 

38 4 
38 4 
33 5 
31 7 
29 6 
28 


1890 
1891 
1892 
1893 
1894 
1895 
1896 
1897 
1898 
1899 
1900 


1901 

1902 

1903 

1904 

1905 

1906 

1907 

1908 

1909 

1910 

1911 

1912 

1913 

1914 

1915 

1916 


25 9 
24 9 
24 4 
23 6 
22 2 
20 10 
18 
17 1 

17 7 

18 
18 8 
17 11 
17 1 

17 5 

18 1 


415,813 
2,121,126 
3,345,502 
3,855,970 
4,754,349 
5,565,969 
6,922,420 
8,536,773 
9,471,391 
8,876,085 
7,763,086 
7,952,994 
8,194,099 
8,073,436 
7,519,416 
7,095,066 


1901 
1902 
1903 
1904 
1905 
1906 
1907 
1908 
1909 
1910 
1911 
1912 
1913 
1914 
1915 
1916 


Total. . . 


313,117,709 


£492,198,901 


£343,248,445 


£119,029,709 





Official statistics showing annual tonnage milled, value of output, working costs.and dividends, 
taken from "South Africa" newspaper, 

8 



The total output for these 30 years was £492,198,901, or about 
$2,300,000,000. The yearly return for 1916 was £38,107,909, or 
about $185,000,000, which was 40 per cent of the world's output for 
that year. The dividends amounted to 24 per cent for the whole 
period, but only 18.6 per cent for the years 1915 and 1916. 

There has been a great struggle to lower expenses, which have 
been reduced from 42 shillings to about 17 shillings per ton. The 
average yield has decreased from 49 shillings to 26 shillings. It 
would seem that the Transvaal fields have reached their maximum 
output and are on the down-grade. 

The Rand Gold Mines are greatly favored in the fact that coal 
is found in close proximity to the gold. Also, native labor has been 
moderate in its wage demands, and outnumbers the white workers 
nearly 8 to 1, thus allowing skilled white workers opportunity for 
generous pay, which they have obtained. 

The existence of gold in Rhodesia has been known for many years 
but material gold returns started only in 1898, and have steadily 
increased until 1916, when the output amounted to over $19,000,000. 
There was a falling off, however, in 1917, of nearly two million dollars. 
The total production from 1898 to 1917, inclusive, amounted to 
$194,672, 165. At present the output is depressed by labor and supply 
conditions, and although the territory for mining operations is vast, 
with still unknown possibilities, there have been no new discoveries of 
late. 

The total production of gold in the United States has been given 
by the Director of the Mint, as under: 

From 1792 to 1847 $24,537,000 

From 1848 to 1872 1,204,750,000 

From 1873 to 1916 2,599,670,200 

Total $3,828,957,200 

The yield up to 1847 was obtained from the Eastern coast; from 
1848 to 1872, largely from the placer mining in the West; and from 
1873 to date, by combination of placer and lode mining and recovery 
of gold from refineries. 

Gold From Placer IMines 

Gold dredging in the United States dates only from 1896, and 
since that date the production of gold has been estimated at $120,- 
103,117. 

9 



In 1916 the greatest amount of placer mining, including dredging, 
was done in Alaska, where over 60 per cent of the gold was thus re- 
covered, and in California, where 38 per cent was recovered. 

The yearly production of gold in the United States, by states, 
from 1914 to 1917, is as follows: 

PRODUCTION OF GOLD IN THE UNITED STATES, BY STATES, 

1914 TO 1917— Inclusive 





1914 


1915 


1916 


1917 


Rank 




$12,300 

16,547,200 

4,568,900 

21,251,900 

19,902,400 

16,800 

1,187,200 

4,143,600 

11,536,200 

1,219,100 

130,300 

1,589,400 

3,200 

7,334,000 

6,400 

8,800 

3,377,000 

300 

587,800 

6,700 

200 


$5,100 

16,710,000 

4,555,900 

22,547,400 

22,530,800 

34,800 

1,170,600 

4,978,300 

11,883,700 

1,460,100 

170,700 

1,867,100 

3,600 

7,403,500 

6,800 

1,800 

3,907,900 

500 

461,600 

13,900 


$7,000 

16,242,000 

4,378,400 

22,110,300 

19,009,100 

20,200 

971,700 

4,575,400 

8,428,200 

1,403,000 

29,700 

1,901,600 

300 

7,512,200 

6,000 

500 

3,593,400 

1,300 

491,800 

83,800 


$4,200 

15,171,300 

5,533,800 

20,815,900 

15,955,100 

6,000 

711,500 

3,756,500 

6,922,900 

1,025,100 

15,700 

1,677,400 

1,100 

7,392,600 

5,300 

900 

3,620,300 

1,700 

434,900 

200 

100 


17 




3 




6 




1 


Colorado 


2 


Georgia 


15 


Idaho 


12 


Montana 


7 


Nevada 


4 


New Mexico 


11 


North Carolina 


14 


Oregon 


9 


South Carolina 


19 


South Dakota 


5 


Tennessee 


16 


Texas 


20 


Utah 


8 


Virginia 


18 


Washington 


13 


Wyoming 


21 


Other states 


23 






Total 


$93,429,700 

2,800 

1,099,300 


$99,714,100 

700 

1,320,900 


$90,765,900 

600 

1,549,600 


$83,052,500 

160 

1,404,000 




Porto Rico 


22 


Philippines 


10 






Total 


$94,531,800 


$101,035,700 


$92,316,100 


$84,456,600 









Although there are enumerated in the foregoing table twenty- 
three states from which gold has been taken, the first seven in rank 
have produced 89.62 per cent of the total for the United States during 
the past four years. These states are, in order: California, Colorado, 
Alaska, Nevada, South Dakota, Arizona and Montana. 

Placer mining operations in 1916 produced about one-fourth of 
the gold output of this country, and of which 56 per cent came from 
gold dredging. 

All of the gold-mining corporations of the United States do not 
make public their yields, costs, or profits, as is the case in the Trans- 
vaal. Our government does not make demand for such information. 
Some of the largest and best managed, however, give most complete 
and generous information, which can be found in the transactions of 
mining societies, mining journals and handbooks. 

10 



There would appear to be no reason for secrecy in gold-mining 
returns, as it is the one business in the world that does not face 
competition in marketing its product. 

The richest and most easily accessible placer deposits in the United 
States, as elsewhere, have long since been worked out. Alaska is 
an exception in that the discovery of placer gold there is of com- 
paratively recent date and guarded by great climatic difficulties. 

Placer mining on a large scale started in this country with the 
discovery of gold in California, in 1848. The appliances and methods 
used were, first, the gold pan, followed by the rocker, long-torn and 
short sluice box; and subsequently by diverting water, shoveling and 
washing gravel into long sluices and working on a large scale ; then 
drift mining, hydraulicking and gold dredging. 

It has been estimated that an ordinary pan holds about 20 pounds 
and that from 45 to 100 pans a day is a good day's work. With a rocker, 
two cubic yards, or say, 3 tons, is a good day's work. The cost of 
sluice mining depends on the character of the material, amount of 
water, grade of the surface, and climate, but it may be said to vary 
from 20 cents to a dollar per yard in temperate climates. 

In Alaska, gravel is subject to a preparative cost for thawing, 
amounting to 20 cents or more per cubic yard. Drifting, i. e., 
underground mining of a thin stratum of gravel and bedrock adjacent, 
varies in cost from one to three dollars per cubic yard, and in Alaska 
as high as from four to five dollars. 

Hydraulic mining, i. e., the concentration of water under great 
pressure on banks of gravel, with provision for the removal of the 
washed material and obtainment of the gold, varies in cost from 2}4 
to 12 cents per cubic yard, and in Alaska up to 25 cents. 

Gold dredging was instituted to work gravel deposits that could 
not be economically worked by other methods. It can be successfully 
employed only when a great number of favorable conditions exist, in 
which case remarkably low costs rule, — from 4 to 9 cents in Cali- 
fornia, and up to 33 cents or over in Alaska. 

Lode or Quartz Mining 

Lode or quartz mining in the United States and Alaska produces 
75 per cent of the output. For the world, the percentage is much 
larger. In South Africa practically all the output is from this source, 
and shafts as deep as 5000 feet have been sunk on the Rand to develop 
the conglomerate deposits. 

11 



In the United States lode mining has been conducted in a great 
variety of formations, and vary the deposits from narrow veins of 
banded quartz with high per ton yield, to great irregular masses of 
low-grade ore. The gold is often associated with tellurium and 
other minerals. When pay has given out at shallow or moderate 
depths, explorations to depths of 4700 feet or over have very often 
been justified. 

The treatment of the ores depends upon their richness and as- 
sociation with other minerals, and the processes for recovery mostly 
in use are the jaw and gyratory crushers, for the larger rocks; followed 
by stamp mills, ball mills or rolls, for finer crushing; then plate 
amalgamation, by which in certain ores the greatest gold return 
is obtained; and concentration by vanners, shaking tables or oil 
flotation devices. The concentrates are treated by smelters, chlorina- 
tion or cyanide works. After stamping or amalgamation the whole 
pulp is often economically treated in bulk by the cyanide process. 

Yields and Mining Costs 

The yields and costs vary in different districts and in different 
mines in each district. The greatest gold producers have been mines 
of low or moderate yield per ton, but with great mass occurrence and 
good conditions for economical working. The best example of such 
mining is the Homestake Mine in South Dakota, which has been 
working since 1875, and has produced over $147,000,000, the ore 
not averaging over four dollars a ton and costs ranging from 2}4 to 
3 dollars per ton, with dividends $40,000,000, or 27 per cent of the 
output. 

The records of the Alaska Tread well Group of Mines started in 
1885, and brought up to June, 1916, showed there had been crushed 
and treated 26,000,000 tons, yielding $63,000,000 or $2.37 per ton, and 
at a cost of $1.42 per ton. The workings were extended to a depth of 
2300 feet. Some of them were under the sea, and the majority of the 
mines were flooded with water on April 21, 1917, and are now closed. 

Lower yields and lower costs have been obtained by the Alaska 
Juneau Company and the Alaska Gold Mines, which are only a few 
miles distant from the Alaska Treadwell Mines. Working on a large 
scale has been started only recently at these mines. In 1916 the 
Alaska Gold Mines crushed nearly 2,000,000 tons, giving a yield of 
97 cents and at reported costs of 73 cents. The Alaska Juneau's 
large mill has only recently been put into operation. It is antici- 

12 



pated their yields and costs will be still lower. These are the lowest 
yields and costs known in gold mining. Hydro-electric power is used 
and all natural conditions ideal for cheap working. 

The Mother Lode in California, on which a 10-stamp mill was 
started in 1852, has been prospected or worked over an area of 125 
miles, and has produced, according to estimates, over $230,000,000 
in gold. At two of the mines shafts have been sunk to vertical 
depths over 4000 feet. Many mines, however, have been abandoned 
at moderate depths owing to failure to make them pay. The early 
returns per ton from the Lode were much higher than recent returns, 
which do not average over $4 per ton. Some old abandoned mines 
have lately been opened up again and by hydro-electric power and 
better system of mining and management, made to yield substantial 
profit. 

A notable case is that of the Plymouth Consolidated Mines, in Ama- 
dor County, on the Mother Lode, reopened after an idleness of 24 
years, liberally equipped by capital and costs reduced to about 
$3 per ton. 

The North Star Mine, in California, is a good illustration of a 
persistent but narrow vein of quartz, worked under good manage- 
ment, and being made to pay moderate profit for a very long period. 
The mine was discovered in 1851, and since then to 1917 has produced 
1,470,000 tons, yielding $18,610,000, or an average of $12.66 per 
ton. The total dividends have amounted to $5,137,000, or about 35 
per cent of the yield. The returns for 1916 were $10.42 per ton, 
with costs at $6.26 per ton. 

An example of very rich yield, but with short life, is found in 
the case of Goldfield Consolidated Mines, Nevada. Here, within 
eight or nine years $50,000,000 has been taken out, but the yield 
fell from $38.50 a ton in 1910 to $7.52 in 1916. The costs must have 
been moderate on account of the magnitude of the lode. 

The Portland Mine, in Colorado, is another rich telluride mine. 
It has produced over $40,000,000, with an average yield of $27 per 
ton. The dividends, however, have not amounted to over 20 per cent, 
as a great amount of development, dead work, and costly mining 
and reduction have been necessary. 

Burdens on Gold Production 

The writer was in California and Montana in December 1917, 
where he had opportunity of discussing with a number of operators, 

13 



managers, and engineers the effect of the present economic con- 
ditions on the future output of gold, as also the proposed excess 
war profits tax. 

As labor and supplies go up, so must the cost of winning gold 
be increased, and the purchasing power of gold decreased. An index 
as to the decreasing purchasing power of gold is obtained by 
noting some of the increases in cost of supplies used in its obtain- 
ment, some of which are given in the table below. 

The advance in cost of hydro-electric power has been small. 
The cost of coal and petroleum varies in different localities, but 
where necessary to use for power seriously advances the cost of 
operations. 

Labor, about 20 per cent. 

Steel (in California) 40 to 280 

Manganese steel (largely used in dredging) .... 130 

Explosives 75 

Quicksilver 93 

Lumber 125 

Machinery, etc 75 

Miscellaneous 10 to 200 

Some companies with liberal margins between profit and loss can 
continue to work under present, or even much worse labor and sup- 
ply conditions, but the excess war profits tax may so operate as to 
induce them to curtail outputs. Some of the mines working on very 
small margins are being closed down gradually and others may be 
kept going for a time by reducing development work and up-keep 
of plant, and generally marking time while hoping for better future 
conditions. 

There has been a fear among operators that through the workings 
of the Priority Board there may be difficulty in obtaining transporta- 
tion and other necessities to keep their mines in constant operation. 

The amount of tonnage that gold mining calls for from the 
the railroad, where hydro-electric power is used, is very small, as 
the finished product of the mines is most concentrated. It would also 
work a great hardship in the gold mining industry to close down the 
works and make the elderly and less efficient workers who have not 
already been tempted by higher wages, seek employment and remove 
their families from the district in which they have spent a large part 
of their lives. 

The excess war profits tax has been somewhat of a puzzle to 

14 



many of the operators. The crux of the whole matter is how rightly 
to determine the rate per cent earned on the invested capital; that 
is, the result of dividing the net income by 1 per cent of the capital. 

If the rate obtained is between 7 and 9 per cent, there is no tax 
to be paid. If above 10 per cent, it progressively mounts until a tax- 
ation of 60 per cent of all net profits can be imposed. 

Difficulties at once arise in the interpretation of what is invested 
capital and what net income, and what are the legal deductions 
from ordinary income allowable before net income is ascertained. 
Invested capital may have an inflated showing in some system of 
accounts kept, while in others it may be over conservative, in order 
to provide against the exhaustion of the mine. 

The interpretation of the returns and the bookkeeping of a gold 
mining corporation becomes a most serious matter. It would 
seem from a reading of the law that a premium is placed on making 
a showing of high or inflated capitalization; also that large out- 
puts and high yearly incomes are so penalized, and especially with 
low capitalization, that it would become a temptation to decrease out- 
puts and take two or three times the usual length of time for mining 
the gold, as when once mined all hope for further profit of working 
is gone. 

To illustrate, let us assume an invested capital of $1,000,000 and 
a net income of $1,000,000 in sight in the ground and with little 
hope of more, but which may be taken out in one or more years. 
What is the proper course for the management to recommend to its 
shareholders? If it is taken out in one year, the rate is 100 per cent 
and the company must pay the government $479,400. If in five 
years, the rate is 20 per cent, and the company would have to pay 
a tax equal to $23,900 by 5, or $119,500. If in ten years, the rate is 
10 per cent, and the company would have to pay a tax equal to 
$1400 by 10, or $14,000. 

Should a small group of miners or prospectors form a small 
company, of say, $10,000 to $100,000 capital, and expend the entire 
capital but strike it rich and take out as net profit an amount equal 
or more than the capital put in, in such case, would not they be 
obliged to turn over to the government nearly half of their profits? 
And under such conditions, is not the search for new gold discovery 
greatly discouraged by the tax? 

It is the writer's view that the elimination of all excess profit taxes 

15 



on gold mining and the encouraging of maximum outputs might in 
reality bring in greater revenue to the government than the tax; 
for larger dividends paid to shareholders would mean greater revenue 
from individuals. 

Gold Standard 

Almost all countries of the world have as their financial basis 
the legal standard of gold. Only a few retain the double standard 
of gold and silver — Italy alone among the combatants. 

Prior to the war, while there was freedom in trade and inter- 
communication between the different countries, the prices of various 
commodities were regulated both from within and without by the 
operation of the laws of supply, demand, and competition, and 
stabilized by the intrinsic value of gold. 

The debts of the principal belligerents at the time of their entering 
the war and those contracted since their entrance, as also an estima- 
tion of further debts per year, are given in a rough and approxi- 
mate manner in the table hereunder. They are sufficiently accurate, 
however, to illustrate the danger of the world's financial situation. 



DEBTS OF PRINCIPAL BELLIGERENTS 





Pre-War 


War 


Total to Dec, 1917 


Future yearly est. 


Allies: 

Great Britain . . . 
France 


$3,500,000,000 
6,346,000,000 
4,544,000,000 
2,900,000,000 
1,200,000,000 


$23,350,000,000 

11,754,000,000 

16,300,000,000 

6,300,000,000 

7,000,000,000 


$26,850,000,000 

18,100,000,000 

20,844,000,000 

9,200,000,000 

8,200,000,000 


$10,000,000,000 
4,400,000,000 


Russia .... 


5,000,000,000(7) 


Italy 


2,500,000,000 


United States. . . 


14,000,000,000 


Total 

Central Powers: 

Germany 

Austria- H u ngary 
Turkey and Bul- 
garia 


$18,490,000,000 

$5,000,000,000 
4,000,000,000 

800,000,000 


$64,704,000,000 

$20,650,000,000 
12,200,000,000 

1,100,000,000 


$83,194,000,000 

$25,650,000,000 
16,200,000,000 

1,900,000,000 


$35,900,000,000 

$8,000,000,000(?) 
4,000,000,000 

350,000,000 






Total 

Grand Total 


$9,800,000,000 
$28,290,000,000 


$33,950,000,000 
$98,654,000,000 


$43,750,000,000 
$126,944,000,000 


$12,350,000,000 
$48,250,000,000 



The table shows at a glance the great difference between the debts 
incurred by the Central Powers and those by the Allies. Taking 
into consideration the number of combatants and the necessary 
munitions and supplies used by them, is it not evident that the Cen- 
tral Powers are getting far more value for their debts contracted than 
the Allies? 

16 



As regards the stock of gold on hand in the world and the amount 
held by the United States, used as money and security, the following 
quotation is given from the Report of the Secretary of the Treasury, 
1917, page 24, viz: 

"The gold monetary stock (coin and bullion used as 
money) in the United States on November 1, 1917, is 
estimated at $3,041,500,000. The increase in the past 
10 months has been $174,500,000; in the past three years 
$1,236,500,000; while in the past five years it has been 
$1,161,333,000. In five years the portion of the world's 
gold monetary stock held by the United States has in- 
creased from approximately one-fifth to more than one- 
third." 

This indicates that the calculation of the gold reserve made pre- 
viously in this paper, corresponds closely with the estimate of the 
Secretary of the Treasury. 

Accepting $10,000,000,000 as the proper gold reserve of the world, 
it may be calculated that at the beginning of the war the gold reserve 
was 35 per cent of the total debts of the principal belligerents, while 
at the present time it is only about 8 per cent. 

DISCUSSION 

When prices of labor and commodities are so advanced that it 
is not possible for the majority of the gold mines of the world to work 
at any profit, then labor and supply prices must become lower, or 
gold becomes automatically demonetized. 

Storage Cells of Human Energy 

Gold coins can be considered storage cells of human energy, as 
to obtain them labor of hand and brain must be expended; in fact, 
they are thus charged with human electro-motive force. They are 
able to give out strong genial currents of trade confidence, circulating 
and binding trade, and bringing together different industries and 
peoples in different lands ; their value is not founded on the fiat of any 
one or more legislative bodies of one or more countries that may be 
experiencing fleeting prosperity, but they are certificates from nature 
of man's work and accomplishment. 

The electro-motive force of the storage battery cells depends 
not only on the amount of the electricity poured into them, but also 

17 



its pressure or intensity. In electrical parlance, the rate of flow 
is known as the amperes and the pressure the volts, while the power, 
the watts. 

In the gold cells filled with human energy, the amperes can 
be considered the number of workers and the volts the forces and 
tools placed at the disposal of the workers by discovery, science, and 
organization. The watts may be considered the labor force stored 
in the cell or coin. 

In the mention of the labor elements poured into the cells, it must be 
understood that labor should include the work of managers, engineers, 
metallurgists, chemists, overseers, mechanics, and other skilled 
laborers, as well as the more unskilled work of drillers, trammers, 
shovellers, etc. 

The electric storage battery of cells can be rendered useless or 
burnt up by excessive charges of current; they can also dry out and 
stop working, or be feebly active should there be an insufficient 
number of cells in the circuit to do the work demanded. 

Translating these conditions to the human electro-motive coin 
cell, the value of gold can be destroyed by its too great abundance and 
its too great ease of obtainment. History is almost uncanny in 
showing how visions of super-abundance as seen or painted by owners 
and miners, have been doomed to disappointment, and how, con- 
sidering time and averages, nature has demanded full toll in labor 
for her gold. 

The electric storage cell can dry out and disintegrate unless 
refreshed with new current; this means that should the obtainment of 
new gold cease while drafts on the old coins are vastly increased, that 
the whole storage battery of gold energy may get so out of adjust- 
ment as not to do useful work, and gold would become demonetized 
and the accumulated labor energy of centuries past, locked up in 
old coins, become inert and valueless. Should all gold mining stop 
or very radically diminish, this would be the result. 

As long as this country, or in fact any country, continues to 
measure values by gold standard and pledge its credit on this basis, in 
the long run the cost of obtaining new gold supply must fix its limita- 
tions to the rise in wages and commodities. Gold is a sluggish 
governor and seems at times inoperative, but its plentifulness and 
cost of obtainment is ever operative, though not the only factor in 
the rise and fall of prices. 

18 



Gold Coins Represent Past Labor Achievement 

The real value of the gold coins is that they represent past 
labor achievements and can not be duplicated in the future without 
equivalent labor effort. Promissory bills or notes, or contingent 
division of profits made by either governments, banks or individuals, 
can be made mere scraps of paper almost overnight by war, revolu- 
tion or commercial failure, but for thousands of years gold, while 
showing fluctuation in purchasing power, has ever been valuable. 

Our government securities and liberty bonds, pledged on a gold 
basis, take the place of gold coins only as long as the people in this and 
foreign countries have faith that the Government can make good its 
promises; when this is seriously doubted by the many, gold will go 
to a premium. 

The great gold reserves of the past would not be so necessary if 
the recognition of the fundamental necessity of measuring gold 
values in units of labor necessary to win it were better recognized and 
insisted upon by governments that pledge their credit on a gold basis. 
Safely to lessen gold reserves while upholding the legal gold standard 
is the great financial problem of the day for this and other countries 

To attempt to adjust the value of the gold coin by changing its 
weight in fine gold by government fiat, would be to take away all 
intrinsic merit from the gold standard and result in confusion and 
utter lack of financial faith and confidence. 

The temptation to enlarge obligations and thus reduce the propor- 
tion of gold reserves to an inadequate amount and meet the difficulty 
by refusing to pay coin for gold pledges, also has great financial dangers. 

ZMoney 

The conception and definition of money has been one of the most 
fruitful subjects of disagreement, argument and books known to man. 
It would seem, however, that the main functions of money are first, 
facilitating exchange; second, a means of estimating comparative 
values of commodities. 

The unreality of paper money is forced upon the writer by his 
study of gold, the happenings of the time and the outlook for the 
future. Money must in a large measure be based on sentiment and 
good faith, for money, even including gold, has no intrinsic value 
except as an incentive or stimulant to future human enterprise, effort 
and labor. Its stored value vanishes when the mass of the people 
repudiate it. When faith in it gives out, those that may seize and 

19 



wish to make new divisions will find only waste paper in the bonds, 
notes and securities so eagerly desired and coveted. 

Money can be converted into reality only by working masses led 
by efficient officers, and who not only make use of the muscular 
energy of the masses, but harness into service all the impersonal 
obedient servitors that discovery, invention, science and engineering 
have placed at the command of man, and which force far exceeds all 
the muscular energy of man. 

The payers of income tax in 1915 did not amount to more than 
one-third of one per cent of the population. The envied rich amount 
to only a fraction of this number. They may enjoy pride of pos- 
session in the paper showings of their bank deposits and lists of 
securities, also the power it gives, but their absorbing power of that 
which money can really give to them individually is very small and 
confined largely to what they and their families can eat, drink and 
wear. All other possessions they must share or pass on to others. 

The rich are merely deflectors, gates or valves in energy currents. 
The greatest wealth by the individual has been obtained by organizing 
labor and producing the necessities of the many at the lowest prices 
and taking small profits per unit, but with the greatest number of 
units. 

As labor in its broader sense has been organized and stimulated 
to produce a maximum amount of commodities, it provides for its 
own necessities and comforts as well as those of the few, and makes 
possible a greater division of such commodities among themselves. 
Thus, great production is beneficial to the many as much, and in 
proportion more, than to the few. 

The decennial census of 1910 shows that above 93 per cent of the 
male population of the United States over 21 years of age is occupied 
in gainful pursuits. A far more difficult problem than the destruc- 
tion of capital would arise among the workers should the present 
order of things be suddenly abolished — determination as to how a fair, 
satisfactory, stimulating division of salaries and wages could be 
arranged and enforced among the workers, so that they would have 
more leisure and at the same time more wants and necessities. 

Wages and Production Must Correspond 

Any advance in wages of one class of workers must in fairness be 
followed by proportionate increases in the wages of other classes and 
as the laborer's wants and requirements for subsistence and comfort 

20 



are dependable on his fellow-worker, so must the cost of his subsistence 
increase as his own and other wages are raised. Thus, in the end no 
material gain can be obtained by labor unless there is some corre- 
sponding advance in the output of his work. 

The Government at the present time is the greatest employer of 
labor and purchaser of commodities. The danger of allowing the 
prices of commodities to rise above the future cost necessary for 
obtaining gold, it is hoped has been made plain. Certainly the 
Government should insist on the stoppage of all classes of profiteering, 
but how is it possible to fix prices of any commodity and make low 
bids possible unless there is some limit fixed upon wages and salaries? 

The war must be won and it will take money as well as men to 
accomplish it. However, it does not help matters to pledge credit 
unnecessarily to please or placate either labor or capital, and the more 
we get for money on a gold basis at the present time the less will be 
the burden of debts incurred on future generations, which must of 
necessity be paid by the mass of the people rather than by the few. 

Allies Must Uphold the Gold Standard 

The financial integrity of the country has been pledged on a gold 
basis. As 91 per cent of the gold output of the world comes from 
the Allies' territories, as a war measure it is plain that it is to the 
advantage of the Allies to uphold the gold standard. For the past 10 
years the world's yearly output of gold has been almost stationary, 
and the present high cost of labor and supplies are acting very 
seriously against any increased production. 

To stop gold mining in a time of financial stress, as has been indi- 
cated, would be like closing the doors of a bank when a run is made 
upon it. It therefore must be evident that it is vital for this and all 
Allied countries to encourage gold mining. 

Unfortunately but little help can be directly extended to the gold 
industry, but as far as possible, encouragement should be given and 
the excess war profits tax placed upon this industry should be recon- 
sidered, for while the war may have proved profitable to every other 
class of industry in the matter of earnings, certainly it has been 
seriously injurious to the gold industry. 

Indirectly, the gold industry, as well as new issues of Liberty 
Loan Bonds, can be greatly helped by the reduction in prices of all 
necessary commodities, and this certainly should be seriously, judici- 
ously and fairly taken in hand by the Government. 

21 



The war is to be won by the efficiency, harmony and morale of the 
workers behind the firing lines as much as by the exercise of these 
qualities by the soldiers at the front. The right conception of what 
gold, and in fact money in any form, has the power of doing, or not 
doing, seems to the writer a matter of most vital concern at the 
present time. A better understanding of this problem, he believes, 
would tend to knit together governments, labor, and capital, and make 
for efficiency, harmony, and happiness. 



22