Mine Finance

PUBLIC discussions of mine finance in the tech-nical press have been confined mainly to methods of providing funds for the development of pros-pects or other mining operations which have not reached the stage of productivity. The application of modern financing methods to mines which have behind them a successful record of net earnings has, for some reason, been given scant consideration by mine owners and managers. In a few conspicuous cases, such for example as the Anaconda Copper Mining Co., Chile Copper Co., and one or two others, industrial finance has been applied to mining operations on the scale and after the fashion of other operations. When extensions are needed re-course is usually had, however, to the sale of common stock, with the obvious disadvantage of diluting the holdings of every stockholder of record prior to such financing. In some cases, it has been sought to over-come this disadvantage by issuing stock purchase rights to shareholders of record. If the stockholder is in a position to acquire additional stock, he may then pre-serve his interest intact, otherwise he must suffer a dilution of his holding. If he purchases additional stock he is, from one point of view, paying more for his in-terest than he bargained for when he made his original purchase. In many cases development and equipment are paid for out of surplus or current earnings. It is sometimes most difficult to explain to a manager why he can afford to borrow money when funds are available from a sur-plus account. Nevertheless, industrial enterprises with adequate surplus accounts often finance new construc-tion by the issuance of bonds. Such a procedure enables the company to maintain its surplus intact, and to con-tinue the payment of dividends during a temporary period of unusual expenditures.