M c G r a w - H i l l C o m p a n y , I n c . J a m e s H . M c G r a w , P resident E . J . M e h r e n , V ice-P resident
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V olum e 28 N E W Y O RK , A U G U S T 27, 1925 N u m b er 9
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V E R Y I N D I C A T IO N se e m s to f a v o r a s u s p e n s io n in th e a n t h r a c i t e r e g i o n ; n o th in g m o re c le a rly th a n t h e a t t i t u d e o f J o h n L e w is, th e le a d e r o f th e m in e w o rk e r s . A n o th e r e le m e n t t h a t f a v o r s a s u s p e n s io n is th e a p p a r e n t d e te r m in a tio n o f th e A d m in is tr a tio n to k ee p h a n d s off. I t w ill do so d o u b tle s s u n le s s th e p r e s s u r e f r o m th e p u b lic is to o s e v e re a s se e m s lik e ly .H e r b e r t H o o v e r h a s r e t u r n e d f r o m C a lif o r n ia , a n d n o a c tio n h a s b e e n ta k e n . I t is b e lie v e d t h a t h e a d v o c a te s a p o lic y o f s il e n t n e u t r a l i t y k n o w in g w ell t h a t a n y e f f o rt to b r i n g m o r a l p r e s s u r e on e i t h e r p a r t y w ill be c o n s tr u e d a s m a k in g a n y a g r e e m e n t t h a t m a y b e re a c h e d a n A d m in is tr a tio n s e ttle m e n t, f o r w h ic h t h e e x e c u tiv e s , i f th e y to o k a n y p a r t , w o u ld b e b la m e d a n d h e ld c h a r g e a b le i f th e y d id n o t p ro v id e f o r i t s e x e c u tio n .
M r. H o o v e r’s c o n te n tio n is t h a t h e d id n o t o u tlin e th e J a c k s o n v ille a g r e e m e n t in th e b itu m in o u s field. T h e o p e r a to rs , h o w e v e r, f e lt th e w e ig h t o f t h e A d m i n i s t r a tio n ’s h a n d a n d m a d e a s e ttle m e n t, th e o n ly one p o ssib le u n d e r th e c o n d itio n s . T h e y w e re , th e y f e lt, to ld to b u y a n d th e y b o u g h t— a t th e m a r k e t p ric e . A s a m a t t e r o f f a c t, a s th e r e c o rd r u n s , th e y w e re n o t to ld to b u y , b u t w e r e m e re ly to ld to go to m a r k e t.
S till t h e f e a r w a s th e r e , w h e th e r o f th e A d m i n i s t r a tio n , o r o f t h e p eo p le o r o f b o th to g e th e r , a n d w h o sh a ll s a y th e f e a r o f th e A d m in is tr a tio n w a s n o t n a t u r a l ? H a d n o t e v e ry p r i o r A d m in is tr a tio n in te r v e n e d a n d b r o u g h t p r e s s u r e to b e a r on th e o p e r a to r s ? W a s t h i s A d m in is tr a tio n to b e a n e x c e p tio n ? E v e r y s ig n p o in te d in th e o p p o s ite d ir e c tio n . So th e y p r e c ip ita te l y s ig n e d n o t f o r a s h o r t p e r io d b u t f o r th r e e lo n g y e a r s , w i t h th e u n f o r t u n a t e r e s u l t t h a t h a s b e e n re c o rd e d a g a in a n d a g a in in th e s e c o lu m n s in all its c o n tin u o u s a n d h a r r o w in g d e ta il.
F o r th e s e r e a s o n s o r o th e r s i t a p p e a r s t h a t th e A d m in is tr a tio n w ill n o t a c t. I t is a r g u e d t h a t to u r g e a s e ttle m e n t on t h e m in e r s , ev e n to a d v o c a te a r b i t r a t i o n f o r th e m m i g h t b e a s o u r c e o f c o n d e m n a tio n la te r . S w a m p s c o tt a n d W a s h in g to n a lik e , a r e m u te . L e t us h o p e th e y w ill c o n tin u e so a n d n o t w e a k e n . I f th e y k n o w n o c a u s e o r im p e d im e n t w h y th e is s u e sh o u ld n o t b e jo in e d l e t t h e m n o w d e c la re i t o r b e f o r e v e r s ile n t. F o r l a t e r e v e n a n a r b i t r a t i o n c o m m issio n m a y , lik e th e B r i t i s h G o v e rn m e n t, n o t d e c id e on ju s t ic e a n d re a s o n b u t s e e k a n y s e ttle m e n t t h a t w ill t i d e o v e r a n
■ u n fo rtu n a te s it u a ti o n . I t is to b e f e a r e d t h a t w h e n th e tim e co m es a n d th e sile n c e is b r o k e n , i t w ill b e f o r a n im m e d ia te fia t t h a t t h e o p e r a to r s in t h e i n t e r e s t o f a n im p e r ile d n a t io n co n c ed e t h e i r r i g h t to c o n d u c t th e ir b u s in e s s w ith o u t loss.
T h e o p e r a to r s a r e a d v o c a tin g a r b i t r a t i o n . T h e y
•don’t w a n t a s tr ik e , b e c a u s e th e y d o n ’t w a n t p u b lic d is a p p ro b a tio n , b e c a u s e th e y h a v e a c le a r c a se a n d b e c a u se a lso th e y q u e s tio n w h e th e r a s t r i k e m i g h t la s t lo n g a n d d e p le te t h e coal b in s so g r e a tly t h a t th e p u b lic w o u ld d e m a n d a c o m p ro m ise , w ith th e m s e lv e s t h e v ic t i m s o f t h e i r o w n p lia n c y to p o litic s a n d p o p u la r clam o r.
V ic to ry , u n f o r tu n a te ly , th e y m u s t h a v e . T h e r e c e n t f r e i g h t d e c isio n m a k e s t h a t m o re n e c e s s a r y th a n e v e r.
T h e n ew th r o u g h f r e i g h t s a r e m e n a c in g ev e n th o u g h th e y a r e f ra m e d f o r th e good o f th e p u b lic a n d a r e in ac c o rd w ith a b ro a d e th ic a l p o lic y o f n o t r e s t r i c t i n g com m erce. A s tr ik e , h o w e v e r, w o u ld g iv e th e low -v o la- tile c o m p e tito r a c h a n c e to d isp la c e th e a n t h r a c i t e p.roducer in th e m a r k e t, a n o p p o r tu n ity to t r a i n t h e co n s u m e r in th e u s e o f a n e w fu e l.
C o n tin u o u s o p e ra tio n , w ith a re d u c tio n in w a g e s b y a n a r b i t r a l c o m m itte e w o u ld sa v e t h e m a r k e t f o r th e a n t h r a c it e m in e r a n d o p e r a to r . B u t a c o m p ro m ise a t p r e s e n t w a g e s w o u ld be u n th in k a b le . T h e o p e r a to r s h a v e now m o re to b a t tle f o r th a n e v e r, a n d i t w ill m a k e th e m le ss p lia n t th a n th e y m ig h t h a v e b ee n .
I t w a s good o f th e I n t e r s t a t e C o m m e rc e C o m m issio n , w h e th e r b y in te n tio n o r w ith o u t, to c le a r u p th e is s u e w h en i t d id. I t m ig h t h a v e d e la y e d i t s o r d e r s till th e o p e ra to rs h a d m a d e a n a g r e e m e n t w ith o u t t h e d e c isio n in view . C o m in g a s i t does i t re m o v e s a n u n c e r ta in t y , a n d th e effect o f th e d e c isio n b e in g d e la y e d t il l O ct. 15 g iv e s th e o p e r a to r s t h a t le n g th o f tim e , a t le a s t, to p r e p a re th e m in e r s a n d th e m s e lv e s to a c t in th e lig h t o f th e d e c isio n in s te a d o f u n d e r i t s c r u s h in g b u r d e n s .
A la s ! th e m in e r s do n o t w e ig h th e f u t u r e . T h e y liv e w h olly in th e p r e s e n t, a n d i t m a y t a k e th e m so m e m o n th s o r even y e a r s to g e t a t r u e m e a s u r e o f t h e C om m e rc e C o m m issio n ’s r u lin g a n d w h e n th e y do i t w ill b e to o la te . T h e a n t h r a c i t e m a r k e t w ill b e “ s h o t to p ie c e s.”
T h e tim e to sa v e t h e s it u a ti o n is now , b u t th e m in e r s c a n n o t see it, a n d th e u n io n le a d e rs do n o t d a r e to se e a n y th in g b u t w h a t th e m o re a g g r e s s iv e u n io n m e n in th e a n t h r a c it e r e g io n d ic ta te .
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H Y S H O U L D t h e P h ila d e lp h ia P u b lic L e d g e r in i t s e d ito r ia l o f A u g . 19 r e t a i l w ith g le e th e m is fo r tu n e s o f th e a n t h r a c i t e o p e r a to r s a n d p r o p h e s y th e tim e w h e n th e a n t h r a c i t e in d u s t r y m a y b e “ a s v ita l to th e N a tio n a s th e to y -b a llo o n b u s in e s s ” ? S u re ly i t h a s b ee n b y c o n tin u a lly in c r e a s i n g w a g e s a n d im p o sin g th e d o m in io n o f th e u n io n t h a t th e a n t h r a c i t e in d u s try h a s b e e n r e s tr ic te d . I t h a s b e e n th e c u s to m o f p a s t a d m in is tr a tio n s , p o litic ia n s a n d p u b lic to im p o s e b u rd e n s a n d th e n to slid e f r o m u n d e r n e a th th e m b y b u y in g coal w h ic h h a s n o t b e e n so b u rd e n e d . S om e o f th e b u s in e s s h a s b e e n lo s t to u n io n coal i t is tr u e , b u t now i t is a b o u t to g o in la r g e m e a s u r e to n o n -u n io n coal re g io n s w h e re w a g e s a r e lo w er.I t w o u ld se em t h a t th e c itiz e n r y , a n d w ith i t th e P u b lic L e d g e r sh o u ld b e d is p o s e d to a p o lo g iz e f o r h a v in g b y u n f a i r d e c isio n s, m a d e f o r p o litic a l r e a s o n s , r u in e d th e a n t h r a c i t e b u s in e s s , b u t in s te a d o f t h a t i t yells i t s tr iu m p h . I t s u n f a ir n e s s h a s d e s tro y e d th e a n t h r a c it e m a r k e t, a n d i t is h a p p y .
N ow i f th e a n t h r a c i t e in d u s t r y is a n u n n e c e s s a r y o c c u p a tio n i t is s u r e ly n o t n e e d fu l t h a t i t b e sco ld ed a n d
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r e g u la te d . W a s th e p u b lic r i g h t to i n s i s t t h a t i t sell th e s e “ b a llo o n s” a t m in im u m p ro fit a n d p a y w ell f o r th e m a n u f a c tu r e o f th e m ? N o w t h a t th e p u b lic k n o w s t h a t t h e b u r n in g o f a n t h r a c it e is m e re ly a g a m e a t w h ic h o n ly th e fo o lish p la y , w h y n o t le t th e in d u s t r y alone.
U n f o r tu n a te ly w e m u s t c o n tin u e th e b a llo o n -s m a s h in g b u s in e s s now w e h a v e s t a r t e d it, a n d one m u s t q u e s tio n w h e th e r th e a d m in is t r a tio n w ill b e a b le to m a k e th e p u b lic d e s is t f r o m its tim e -h o n o re d s p o r t.
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L E A D I N G e d ito r ia l in a N e w Y o rk d a ily o p p o se s th e im m e d ia te s u b m is s io n o f th e a n t h r a c i t e q u e s tio n to a r b i t r a t i o n a n d s a y s “ th e p u b lic c a n n o t f o r e v e r b e m a d e to b e a r th e b u r d e n o f th e h a r d - c o a l m in e s ’ p e c u lia r d o m e stic s t r a t e g y . ” I t c o n tin u e s b y s u g g e s tin g t h a t m in e r s a n d o p e r a to r s s h o u ld a r r i v e o f th e m s e lv e s a t a n a g r e e m e n t a n d t h a t “ t h i s c o n tin u a l p ro c e s s o f m a n e u v e r in g w h a t o u g h t to b e a te c h n ic a l q u e s tio n is n o t o n ly in e x c u sa b le , i t is also j u s t a lit tle tir e s o m e .” T h is s a m e d a ily in p a s t y e a r s h a s b e e n in f a v o r o f a r b i t r a tio n o f coal d is p u te s , b u t t h a t w a s w h e n t h e s t r i k e o r s u sp e n sio n , w h ic h e v e r i t sh o u ld be te rm e d , h a d been lo n g in d e s tr u c tiv e o p e ra tio n .T h e co al in d u s t r y h a s t r i e d o u t t h e o rd e a l b y c o m b a t w ith th e u n io n . I t h a s h a d lo n g s tr ik e s a n d th e p u b lic h a s o b je c te d s tr e n u o u s ly . T h e in d u s t r y h a s b e e n to ld in n o equ iv o cal te r m s t h a t su c h c o m b a ts m u s t n o t o cc u r a g a in . So th e o p e r a to r s call f o r a r b i t r a t i o n a n d th e y a r e to ld n o w t h a t t h e i r w illin g n e s s to a r b i t r a t e is p r e m a tu r e a n d t h a t th e p u b lic m u s t n o t b e b o th e re d .
L e t u s ta k e a g la n c e b a c k in to h is t o r y , w h e r e o u r p r e ju d ic e s w ill n o t be so s t r o n g a s a b o u t p r e s e n t- d a y m a tte r s . L o n g a g o w h e n e v e ry d is p u te e n d e d in a t r i a l b y c o m b a t o r a p e r s o n a l e n c o u n te r o f a le ss w ell r e g u la te d c h a r a c te r , th e k in g s f o u n d th e m s e lv e s h u m ilia te d by t h e i r e n e m ie s a n d im p o v e ris h e d b y t h e d e s tr u c tio n o f th e n a t io n ’s s u b s ta n c e .
T h e k in g s d id n o t lik e to b o th e r w i t h c o u r ts a n d j u r i e s a n d th e y tr i e d to m a k e t h e i r s u b je c ts c e a s e t h e i r b ic k e r in g s b y a s y s te m o f p r e s s u r e w h ic h w a s b a s e d m o re on a d e s ir e f o r p ea ce t h a n a love o f ju s tic e . B u t th e fig h ts c o n tin u e d . So lo n g a s th e r e w a s o n ly g o v e r n m e n t in te r f e r e n c e w ith o u t ju s tic e , t h e r e w a s c o m b a t.
T h e o rd e a ls a n d th e h a n d - to - h a n d e n c o u n te rs c e a s e d o n ly w h e n k in g s w e re w illin g to b e b u r d e n e d b y th e q u a r r e ls o f t h e i r s u b je c ts . I t m i g h t b e “ j u s t a l it tle tir e s o m e ” t h a t th e s e u n d e r lin g s s o u g h t ju s tic e , b u t k in g s m u s t t i r e o c c a s io n a lly o r b e re p la c e d b y o th e r s n o t so n e g lig e n t. A n d so th e y e s ta b lis h e d c o u r ts , a n d m o re a n d m o re w a s le f t to th e a d j u d ic a tio n s o f th e ju d g e s .
M. J o u r d a in , a b o u r g e o is w h o on ce o n a tim e d e s ire d to be in s t r u c te d in l i t e r a t u r e , a s k e d h is i n s t r u c t o r to a c q u a in t h im w ith a f o rm o f e x p r e s s io n t h a t w a s " n i p ro se n i v e r s ," n e i th e r p ro s e n o r p o e try . N ow , so m e t h i n g lik e th is is w h a t som e ó f th e w o u ld -b e p a c ific a to rs a r e s e e k in g , n e i th e r s t r i f e n o r ju d ic ia l d e te r m in a tio n . H o w e v e r, i t is c le a r t h a t m e n w h o h a v e a q u a r r e l m u s t h a v e one o r t h e o th e r m e a n s o f s e ttli n g t h e i r d is p u te . I n t h i s c a se i t m u s t b e e i t h e r a s u s p e n s io n ( lik e ly to be lo n g a n d d i s t r e s s in g f o r t h e is s u e s a r e r e a l ) ' o r a n a r b i t r a t i o n .
T h e p u b lic b eliev e s th e c o u r ts sh o u ld b e r e a d y to a c t b e f o r e a n y o n e is h u r t , w h e th e r d is p u t a n ts o r m e re ly u n o ffe n d in g b y s ta n d e r s . So le t us h a v e th e a r b i t r a t i o n
now , b e fo re th e s u p p ly o f coal h a s d w in d le d a w a y , w h e a w e c a n a c t w ith o u t e x c ite m e n t a n d w ith o u t f e a r o f a co al-less w in te r . A r b i t r a t o r s a r e so m e tim e s m o v e d to d ec id e th r o u g h f e a r o f c o n s e q u e n c e s to th e p u b lic r a t h e r t h a n b y th e a c tu a l im p lic a tio n s o f j u s t i c e .- W e a r e n o t s u r e t h a t a l it tle o p p o r tu n is m m ig h t n o t i n tim e s o f d ir e n a tio n a l n e e d r ig h t l y te m p e r ju d g m e n t.
T h e B r i t i s h G o v e rn m e n t h a s j u s t s e ttle d i t s d is p u te b e tw e e n m in e r s a n d o p e r a to r s b y p r o m is in g a p a y m e n t o f $100,000,000. T h a t m a k e s a C oal C o m m issio n c o s tin g
$600,000 look r e la tiv e ly c h e a p . T h e B r i t i s h M in i s tr y d oes n o t ev e n t r y to d e fe n d th e e s s e n tia l j u s t ic e o f its a c tio n s . I t a d m its i t is b u y in g p e a c e a t th e lo w e s t m e rc h a n ta b le p ric e . So w h y sh o u ld w e d e la y i f w e w a n t a r i g h t d e c isio n a n d n o t m e re ly o n e w h ic h is- o b ta in e d lik e t h a t in G r e a t B r i t a i n b y b u y in g o u t b o th p a r t i e s ?
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O R E A N D M O R E th e p r a c tic e o f d r iv in g r o c k tu n n e ls in co al m in e s is 'in c r e a s in g , b e c a u s e th e r e la tiv e c o s t o f ro a d w a y s o f th i s ty p e is d e c r e a s in g , a n d i t is f o u n d t h a t su c h c o n s tr u c tio n re m o v e d f r o m m ine- o p e ra tio n is m o r e p e r m a n e n t t h a n a r o a d w a y w o u ld be i f d riv e n in a coal b e d in p ro c e s s o f e x tra c tio n .A s f o r co st, t h e r e is a g r e a t s a v in g f r o m th e u se o f lo a d in g m a c h in e s w h ic h do th e h a r d e s t o f th e w o rk — m u c k in g . W ith s u c h a m a c h in e th e m in e r is q u ite w illin g to re m o v e y a r d s w h e r e h e f o r m e r ly w a s c o n te n t to re m o v e o n ly fe e t. W ith p o w e r d r illin g e q u ip m e n t h e c a n d r ill h o le s w i t h g r e a t sp e ed a n d w ith m in im u m la b o r. B y s h u t t i n g off th e tu n n e lin g f r o m th e r e s t o f th e w o rk in g s th e m a n a g e m e n t c a n o f te n o p e r a te th e e x c a v a tio n a s s o m e th in g a p a r t f r o m th e m in e a n d w ith o u t b e in g s u b je c t to la w s f r a m e d to p r o te c t th e o p e r a tio n o f a g o in g c o llie ry a n d w ith b e t t e r c a r e f o r th e h e a lth a n d s a f e ty o f th e w o rk m a n .
T h u s t h e o p e r a to r c a n p ro v id e a n a i r d u c t a n d a sp e c ia l f a n t h a t w ill c le a r a w a y t h e sm o k e a n d w aste- g a s e s o f a s h o t o r s h o ts in a fe w m in u te s a f t e r t h e y a r e fo i'm ed , s a v in g tim e a n d p ro v id in g f o r t h e i r m o r e p e r f e c t e v a c u a tio n . S h o ts c a n b e fire d w ith d e la y fuses- su c h a s a r e u se d in m e ta l-m in e a n d r a il r o a d t u n n e ls , .F u r th e r m o r e , th e o p e r a to r c a n a v o id th e d a n g e r s o f a b a d d r a w s la te w h ic h m a k e d r iv in g r o a d w a y s in th e coal h a z a rd o u s .
A n o th e r a d v a n ta g e is t h a t th e o p e r a tio n o f th e m i n e is n o t in te r f e r e d w ith w h e n th e tu n n e l is b e in g d riv e n . E x te n s iv e g r a d in g o f m in e ro a d w a y s is a s o u rc e o f m u c h a n n o y a n c e w h e n th e m in e is b e in g o p e r a te d , a n d th e tr a n s f e r e n c e o f ro c k c l u t t e r s th e m in e ro a d w a y . I t m a y b e a d d e d t h a t a tu n n e l in th e ro c k sa v e s ex ten siv e- a n d co stly tim b e r in g w ith a ll t h e d a n g e r s t h a t ac co m p a n y th e use o f su c h c o n s tru c tio n in coal.
O ne w o n d e rs s o m e tim e s t h a t m in e s c o n tin u e to be- w o rk e d u n d e r all k in d s o f d is a d v a n ta g e s a s to h au lag e - a n d d r a in a g e w h e n a r o a d w a y m ig h t b e d r iv e n t h a t w o u ld b e f a v o r a b le to b o th . T h e id e a o f d r iv in g ro c k tu n n e ls , h o w e v e r, is u n u s u a l e n o u g h to be r e g a r d e d in.
m a n y p la c e s a s n ew . Y e t th e ro c k tu n n e l in m a n y a n t h r a c i t e m in e s is u se d q u ite e x te n s iv e ly , b e in g f o u n d m o re p e r m a n e n t th a n ro a d w a y s in th e co aL W h e r e t h e se a m o p e n s on th e h ill a t a n in c o n v e n ie n t level, a ro c k tu n n e l c a n s o m e tim e s b e d r iv e n t h a t w ill d eb o u c h a t a level c o n v e n ie n t to th e to p o f th e tip p le . W ith a ll t h e m o d e rn e q u ip m e n t g e n iu s h a s in v e n te d a n d develo p ed , th e d r iv in g o f a ro c k tu n n e l is n o t s u c h a fea rso m ely "
e x p e n siv e , slow a n d difficu lt jo b a s i t u s e d to be..
Au g u s t 27, 1925 C O A L A G E 275
E x am in in g E n g in e e r’s W o rk P lays V ital P a rt in F in a n cin g o f a Coal M ine P ro p e rty
E a r n in g V a lu e and N o t H is A p p r a is a l, H o w e v e r , S h o u ld F ix A c tu a l W o r t h — E x c e s s R a te s S h o u ld N o t B e P u t U p o n C o a l B o n d s — O u tlin e
S h o w s I t e m s to C over in A p p r a isa l
By J o h n A. G arciaC o n s u ltin g E n g in e e r, C h ic a g o , 111.
C
O N F U S I O N E X I S T S in m a n y m in d s c o n c e rn in g so u n d fin a n c in g o f coal p r o p e r tie s . S o m e o f t h i s p o ssib ly c a n be re m o v e d b y c o n s id e r in g th e p a r t w h ic h good e n g in e e r in g sh o u ld p la y in a id in g b a n k e r a n d .c o a l o p e r a to r to a r r a n g e p r o p e r ly th e a f f a ir s o f a p r o d u c in g c o m p a n y . T h e y sh o u ld r e a liz e t h a t a n e n g in e e r ’s a p p r a is a l sh o w s th e p h y s ic a l r e p la c e m e n t co st, n o t th e s e llin g v alu e, o f a p r o p e r ty . H e sh o u ld n o t be e x p e c te d to o v e r b u r d e n a m in e w ith in o p e ra tiv e a c r e a g e m e re ly to r a i s e th e to ta l v a lu e in p r o te c tio n o f b o n d s.
T h e b a n k e r m ig h t p r o fit b y th e ju d g m e n t o f th e e x p e r i
e n c ed e n g in e e r ev e n in fix in g o th e r b a s ic te r m s f o r m in e fin a n c in g . E v e r y b o d y c o n c e rn e d o u g h t to u n d e r s ta n d w h a t a n a p p r a is a l s h o u ld co v er, b u t re lia n c e u p o n th e e n g in e e r sh o u ld n o t c e a s e w h e n t h a t d o c u m e n t is filed.
T h e w o rd “ a p p r a i s e ” is d efin e d in th e d ic tio n a r y a s —
“ to m a k e a n official v a lu a tio n o f, o r to s e t a p r ic e o n ; ” th e w o rd “ v a lu e ” m e a n s w o r th , a n d th e w o rd “ w o r t h ” m e a n s , a m o n g o th e r th in g s , th e m a r k e t v alu e. I n b u s in e s s tr a n s a c t i o n s a n a p p r a is a l is o r d in a r ily u n d e r s to o d a s a f ig u re o r p r ic e f o r w h ic h th e p r o p e r ty m a y b e sold on th e m a r k e t.
H o w e v e r, s in c e th e r e is n o o p en o r r e g u l a r m a r k e t f o r co al a c r e a g e o r m in e s a n a p p r a is a l h a s n e c e s s a rily com e to m e a n s o m e th in g o th e r t h a n a s sp e cifie d in th e d ic tio n a r y , th o u g h t h i s f a c t is n o t g e n e r a lly k n o w n a n d th e a p p r a is e d fig u re is o f te n m is ta k e n f o r th e e n g i
n e e r ’s c a lc u la te d s e llin g p r ic e f o r t h e p r o p e r ty .
A n a p p r a is a l o f th e p h y s ic a l a s s e ts , a s a p p lie d to coal m in in g , is t h e c a lc u la te d re p la c e m e n t co st, d e p r e c ia te d f o r c o n d itio n , o b so le sce n ce a n d m in e lif e a n d , th e r e f o r e , n o t r u e r e la tio n e x i s ts b e tw e e n th e a p p r a is a l f ig u re a n d th e a c tu a l v a lu e o r w o r th o f th e p r o p e r ty a s a m o n e y m a k in g b u s in e s s p r o p o s itio n , e x c e p tin g in c a se s w h e r e th e tw o to ta ls ch e ck b y c o in cid e n ce . F o r ex a m p le , a m in e m a y a p p r a is e on a p h y s ic a l re p la c e m e n t b a s is a t, sa y , $500,000, b u t c a n e a r n in n o rm a l tim e s o n ly $10,000 p e r a n n u m , in w h ic h c a se th e t r u e v a lu e o r w o r t h o f th e o p e r a tio n on a 20 p e r c e n t e a r n in g b a s is is o n ly $50,000 o r o n e - te n th o f th e r e p r o d u c tio n cost.
M isunderstanding of these f tc ts has led bankers and operators, and especially prom oters, into grievous e r
ro rs in financing coal p ro p e rtie s; th e banker w ants to see th e total values high enough to protect his loan sev
eral tim es over bu t w ith u n it prices low' enough to p erm it of full coverage in event of forced sale under default, and the o ther side, having a fixed or lim ited property w ants th e u n it figures high so th a t the total m ay reach the ban k er’s requirem ents.
T h e e n g in e e r, s t r i v i n g to b e im p a r tia l, is b e d e v ile d b y th e c o n flic tin g in te r e s ts , c a n s a t i s f y n e i th e r s id e a n d th e e th ic s o f h is p r o fe s s io n , to g e th e r w ith h i s d u ty to t h e in v e s tin g p u b lic , o f te n in d u c e s h im to t a k e th e b a n k e r ’s v ie w p o in t ev en th o u g h h e k n o w s f u ll w ell t h a t
th e a d d itio n a l a c r e a g e o r p r o p e r ty a d d e d to b r i n g up*
th e p h y sic a l v a lu a tio n w ill f o r m a fixed c h a r g e a n d o f te n a s e rio u s b u r d e n to th e o p e r a to r .
F o r e x a m p le , a m in e w ith a n a s s ig n e d a c r e a g e o f p r o p e r siz e m a y a p p r a is e a t $500,000 a n d h a v e a n a c tu a l a n n u a l e a r n in g re c o rd o f 50 p e r c e n t on its v a lu a tio n w ith a s s u ra n c e o f c o n tin u e d p e r f o rm a n c e , b u t to o b ta in , a bo n d is s u e o f $300,000 on s u c h a go o d b u s in e s s p r o p o sitio n , th e o p e r a to r s h o u ld ow n o u t r i g h t e n o u g h p r o p e r ty to m a k e th e t o ta l p h y s ic a l r e p la c e m e n t v a lu a tio n a p p ro a c h $900,000. T h e c a r r y i n g c h a r g e s on th e a d d i
tio n a l $400,000 is c le a rly a fixed b u r d e n to th e o p e r a t o r a n d m a y be o ffse t on h is b o oks o n ly b y a c o n s ta n t in c r e a s e in th e v a lu e o f th e a c r e a g e w h ic h m a y o r m a y n o t a c c r u e
T h e b a n k e r ’s in s is te n c e on o th e r so -ca lle d s a f e g u a r d s m a d d itio n to th e f o rc e d -s a le v a lu e is p r o b a b ly a wise- p r e c a u tio n f ro m h is v ie w p o in t w h ile n e g o t ia t in g th e loan, b u t, u n f o r tu n a te ly , w ill u ltim a te ly b r i n g a b o u t a d ir e c t o v e rh e a d e x p e n se t h a t m a y f o r m a m e n a c e to th e s in k in g f u n d o r i n t e r e s t c h a r g e .
In m o st c a se s th e m o r tg a g o r r e q u ir e s t h a t a p p r o x i
m a te ly h a lf th e coal in th e p r o p e r ty s h a ll r e m a in u n m in e d w h e n th e b o n d s a r e p a id off, w h ic h se e m s q u i t e u n f a i r s in c e t h e s in k i n g f u n d a p p lie s to all coal h o is te d an d , th e r e f o r e , i f th e o u tp u t s h o u ld becom e u n u s u a lly la rg e , th e f u n d a u to m a tic a lly in c r e a s e s a n d to t h e e x te n t o f su c h in c re a s e th e b a s ic s e c u r ity o f coal in th e g r o u n d '
Coal Field Map Is W o rth W hile
T h e lo c a tio n o f th e m in e to be fin a n c e d w ith r e la tio n to its.
n e ig h b o r in g c o m p e tito rs — e a c h o th e r m in e n u m b e r e d a n d n a m e d , in th e m a p ’s c a p tio n — to g e th e r w ith o th e r s u r f a c e f e a t u r e s s u c h a s th e lo c a tio n o f n e a r b y to w n s a n d r a i l lin e s a ll h e lp to m ake- th e a p p r a i s a l co m p le te .
276 C O A L A G E Vo l. 28, No. 9
is c o n v e rte d to c a s h in s in k in g f u n d . I t is a s s u m e d , o f c o u rse , t h a t th e a v a ila b le coal a s c a lc u la te d is, in q u a n t ity , su fficie n t to a m o rtiz e th e in v e s tm e n t v ia th e
■per to n r a te .
A g a in , a m o r tg a g e m a y p r o p e r ly b e p la c e d o n ly on f e e sim p le a c r e a g e o r m in e r a l o w n e d o u t r i g h t in o r d e r to be a f ir s t lie n . V e r y o fte n , e s p e c ia lly in th e m id - w e s te r n field, th e r o y a lty r a t e s on le a se d la n d a r e so lo w t h a t o u t r i g h t p u r c h a s e w o u ld m e a n a v e ry b a d b u s in e s s in v e s tm e n t, b u t, n e v e r th e le s s , t h e p u rc h a s e m u s t be m a d e i f th e r i g h t s o f th e m o r tg a g o r a r e to b e p r i o r to th o s e o f th e la n d lo rd . T h is m a t t e r b e c o m e s s e r io u s o n ly w h e n a la r g e p o r tio n o f th e a c r e a g e o r s o m e p a r ti c u la r l y choice t r a c t is a le a se h o ld a n d in su c h c a se s th e p r o p e r p ro c e d u re , in m y o p in io n , is e i t h e r to a c q u ir e t i t l e o r fin an ce w ith s to c k r a t h e r th a n b o n d s, th o u g h i t is p o ssib le som e g u a r a n te e m a y be m a d e b y th e le s s o r t h a t w ill p r o te c t th e b o n d s in e v e n t o f d e f a u lt.
T h e d u ty o f th e e n g in e e r m a k in g a n a p p r a is a l m a y p o s s ib ly r e q u ir e t h a t h e f u r n i s h a n a n a ly s is o f th e coal b u t h a r d ly a . s ta te m e n t a s to i t s a p p lic a tio n to f u r n a c e r e q u ir e m e n ts o r a c r itic is m o f th e q u a lity , a n d su c h q u e s tio n s a s p e r s o n n e l o f m a n a g e m e n t, c o n t r a c ts a n d re v e n u e on to n n a g e , p r o d u c tio n co sts, etc., a r e c le a rly o u ts id e th e p ro v in c e o f a n a p p r a is a l. T h e s e ite m s a re , a m o n g o th e r s , o f v ita l im p o r ta n c e to a n y fin a n c ia l s e t-u p s o i t m a y r e a d ily b e u n d e rs to o d h o w u t t e r l y v a lu e le s s a n a p p r a is a l o f p h y s ic a l p r o p e r ty is o f i ts e lf in d e t e r m in i n g th e t r u e w o r th o f a coal m in e o r its p o s s ib ilitie s a s a b u s in e s s p r o p o s itio n .
I n m y o p in io n th e p r a c tic e o f r a t i n g coal b o n d s u p o n e o r tw o p o in ts ab o v e o th e r i n d u s t r ia ls f o r i n t e r e s t a n d c h a r g in g f ifte e n to tw e n ty p e r c e n t f o r flo ta tio n is n o t f a i r , f o r e i th e r th e is s u e is go o d a n d c a n s t a n d up u n d e r m ic ro sc o p ic e x a m in a tio n w ith o th e r in d u s t r i a l iss u e s, in w h ic h e v e n t i t sh o u ld n o t be p e n a liz e d , o r i t is n o t good a n d no r e p u ta b le b a n k e r sh o u ld s p o n s o r it.
Di s c o u n t s In d i c a t e We a k n e s s
T h e a r g u m e n t t h a t th e sa le s r e s is ta n c e to coal s e c u r i
t i e s n e c e s s ita te s su c h d is c o u n ts a n d h ig h i n t e r e s t r a t e s a p p e a r s f a lla c io u s to m e, f o r a n y s e n s ib le in v e s to r .w o u ld im m e d ia te ly b ec o m e s u s p ic io u s o f a 7 p e r c e n t b o n d on a 5 p e r c e n t m a rk e t, o r a 95 q u o ta tio n o n a 100 p a r b o n d , e i th e r o f w h ic h is in d ic a tiv e o f w e a k n e s s a n d is th e v e r y t h i n g a n in v e s to r o r b a n k e r s e e k s to av o id so t h a t th e f a c t t h a t th e i n t e r e s t r a t e is o v e r t h e n o r m a l o r th e b o n d s a r e q u o te d u n d e r p a r , a c tu a lly in c re a s e s sa le s r e s is ta n c e a n d p y r a m id s th e d ifficu lties o f m a r k e tin g .
T h e h a z a r d s o f t h e in d u s t r y do n o t a p p e a r to w a r r a n t a n y ex cess r a t e s on co al b o n d s, f o r good m a n a g e m e n t p r e s u m e s am p le in s u r a n c e in c lu d in g c a ta s tr o p h e , a n d i f th e o p e r a tio n is e x t r a o r d i n a r ily h a z a r d o u s a s to g a s , fire, flood, e tc . t h e lo a d o n f ir s t m o r tg a g e sh o u ld b e p r o p o rtio n a te ly re d u c e d o r, a g a in , th e p r o p o s itio n is f o r sto c k r a t h e r t h a n b o n d s. I t is a lso t r u e t h a t a m in e d is a s te r t h a t d e s tro y s t h e p h y s ic a l p r o p e r ty b e y o n d re c o v e ry is a r a r e o c c u rre n c e . U s u a lly t h e lo ss is in p e r s o n a l i n j u r y c a se s c o v e red b y lia b ili ty in s u r a n c e , a s is th e b u s in e s s lo ss w h e n c a ta s tr o p h e in s u r a n c e is p ro v id e d .
S h o u ld a r e p o r t, a n a p p r a is a l a n d a n a u d i t e a ch re fle c t a s a f e a n d p ro fita b le co al o p e ra tio n — a n d t h i s Is th e o n ly k in d on w h ic h a b o n d is s u e m a y p r o p e r ly be p la c e d — th e te r m s a n d i n t e r e s t r a t e s sh o u ld be in lin e
HOUSE W ASHHOUSE.
A n Im p o rta n t F e a tu re of an A p p ra isa l
A n y b o d y in te r e s te d in fin a n c in g a m in in g p r o p e r t y c a n g e t a b e tto r id e a o f th e c h a r a c t e r o f i t w i t h th e a id o f p h o to g r a p h s , p r o p e rly a r r a n g e d , t h a n h e ca-n fro m th e w r i t te n r e p o r t a lo n e .
w ith th o s e o f o th e r in d u s t r ie s . B e c a u s e o f s e a s o n a b le d e m a n d a n d r e c u r r e n t cyfcle o f p e a k p r o d u c tio n e v e ry fe w y e a r s , s e r ia l b o n d s a r e n o t e s p e c ia lly d e s ira b le , o f te n p r o v in g to be a h e a v y b u r d e n in tim e s o f s tr e s s a n d a lig h t lo a d in flu sh p e r io d s d u r in g w h ic h i t w o u ld b e d e s ira b le to r e t i r e l a r g e r p o r tio n s o f th e lo a n .
A lth o u g h th e h i s t o r y o f a n o p e r a tio n h a s a b e a r in g on th e se t-u p ,, to o o f te n t h i s m a t t e r is g iv e n m o re co n s id e r a tio n a n d im p o r ta n c e t h a n t h e f a c t s w a r r a n t . A n old a n d s u c c e s s fu l coal m in e w ith a fine r e c o rd m a y b e m u c h m o re o f a r i s k t h a n a n e w a n d modez-n m in e w ith no e a r n in g r e c o r d a t all. T h e p r a c tic e o f in c lu d in g old a n d o b so le te o p e r a tio n s in a m e r g e r b e c a u s e o f t h e i r e a r n in g r e c o rd — “ to s w e e te n t h e p i c t u r e ” — c a n b e j u s t i fied o n ly w h e n t h e i r f ir s t c o s t is m o r e o r le ss n o m in a l o r t h e i r a c q u is itio n b y m e r g i n g i n t e r e s t s p e r m i ts o f re d u c e d s t r a i n in c o m p e titio n f o r m a r k e t i n g t h e o u tp u t, th e r e b y te n d in g to w a r d ^ e lim in a tio n o f s u ic id a l p r ic e s a n d u n n e c e s s a r y p ro d u c tio n .
T h e a p p r a is a l o f t h e p h y s ic a l p r o p e r ty is e s s e n tia lly a n in v e n to r y w ith p r ic e s a n d u s u a lly t h e r e s h o u ld b e tw o s e ts o f fig u re s f o r e a c h i t e m : F i r s t , th e p r e s e n t- d a y c o s t a n d , se co n d , t h e d e p r e c ia te d re p la c e m e n t co st, th o u g h th e l a t t e r is su ffic ie n t i f t h e p e r c e n ta g e o f d e p re c ia tio n is sh o w n , e x c e p tin g in c a se s w h e r e t h e re p la c e m e n t c o s t n e w is d e s ire d . T h e field w o rk , th o u g h m a in ly c le ric a l i n s o f a r a s t a k i n g in v e n to r y is c o n c e rn e d , ca lls f o r e x p e r t k n o w le d g e o f a ll c la sse s o f e q u ip m e n t a n d s t r u c t u r e s a s u se d a t coal m in e s to n o te in te llig e n tly th e a m o u n t o f d e t e r io r a ti o n a n d , e s p e c ia lly , o b so lescen ce.
T h e n o te s m u s t a lw a y s g iv e g o v e r n in g d im e n s io n s o f
Au g u s t 27, 1925 C O A L A G E 277
MAIN H O IST A U X IL IA R Y HOIST
How W ell E quipped Is T his M ine?
T h is im p o r t a n t q u e s tio n , a lw a y s a s k e d c o n c e r n in g a c o a l p r o p e r t y a b o u t to b e r e fin a n c e d , is o n ly p a r t i a l ly a n s w e r e d if th e a p p r a i s a l d o e s n o t c o n ta in c le a r p h o to g r a p h s o f th e m a c h in e r y a n d e q u ip m e n t.
b u ild in g s , a s w ell a s s p e c ific a tio n s a n d co n c ise n o ta tio n s t h a t w ill a id th e office in c a lc u la tin g v a lu e s.
D e ta ile d in v e n to r ie s o f all b u ild in g s , e q u ip m e n t a n d m is c e lla n e o u s im p r o v e m e n ts a r e , o f c o u rse , ta k e n in th e field a n d th e m in e s e n te r e d a n d in s p e c te d to d e t e r m in e th e th ic k n e s s a n d c h a r a c t e r is ti c s o f t h e co al se a m . T h e p r e s e n t c o n d itio n a n d a g e o f all ite m s is n o te d to be u s e d in fix in g t h e p e r c e n ta g e o f d e p r e c ia tio n .
A ll ite m s a r e f ig u re d f o r r e p la c e m e n t c o s t a s o f th e c u r r e n t d a te a n d a r e d e p re c ia te d a c c o r d in g to th e c o n d itio n s in w h ic h th e y h a v e b e e n m a in ta in e d , d u e allo w a n c e b e in g m a d e f o r o b so le sce n ce a n d n u m b e r o f y e a r s in se rv ic e . O n th e p e r m a n e n t b u ild in g s , e q u ip m e n t, s h a f ts , slo p es o r d r i f t s , t h e d e p r e c ia tio n is f u r t h e r a d j u s te d to g iv e e ffe c t to th e r a t i o o f a c r e a g e d e p le te d to a s s ig n e d a c r e a g e .
In a r r i v i n g a t r e p la c e m e n t cost, th e m a r k e t p r ic e o f la b o r a n d m a te r ia l p r e v a ilin g in t h e d i s t r i c t w h e r e th e p la n t is lo c a te d is u s e d to d e te r m in e th e c o s t o f e a ch ite m in p la ce . T h r o u g h o u t th e a p p r a is a l th e “ R e p la c e m e n t C o s t” o f th e d e ta ile d e x h ib its in th e s u m m a rie s in c lu d e s all e x p e n se s f o r to o ls a n d la b o r r e q u ir e d to f u r n i s h e a c h ite m in p la ce , in c lu d in g c o n t r a c to r s ’ c o n tin g e n c ie s an^l p r o fits a s o f c u r r e n t d a te . T o t h i s c o s t a p e r c e n ta g e v a r y i n g w i t h th e d if fe r e n t c la s s e s o f w o rk is a d d e d f o r e x p e n se o f o r g a n iz a tio n , e n g i n e e r in g a n d in c id e n ta ls .
T h e ite m o f “ O r g a n iz a tio n ” in c lu d e s su c h c o s t a s g e n e r a l office ex p e n se , o b ta in in g b id s , a w a r d i n g co n tr a c ts , b ills o f m a te r ia l, p u r c h a s in g m a te r ia l, s a la r ie s o f
officers c h a rg e a b le to c o n s tr u c tio n a n d le g a l e x p e n se c h a r g e a b le to c o n s tru c tio n .
T h e ite m o f “ E n g in e e r in g ” in c lu d e s c o s t o f p r e p a r a tio n o f p la n s, d r a w in g s a n d sp e c ific a tio n s, to g e th e r w ith ex p e n se o f g e n e r a l s u p e rv is io n a n d in s p e c tio n r e q u ir e d in c a r r y in g o u t th e p la n s a n d sp e c ific a tio n s.
“ I n c id e n ta ls ” co v e r all g e n e r a l e x p e n se s t h a t lie o u t
s id e o f c o n tr a c te d co st, su c h a s m i g h t b e in c lu d e d a s e x t r a s on th e c o n t r a c t p ric e . T h e s e m a y b e d u e to sm a ll c h a n g e s in d e s ig n , to i n te r f e r e n c e w ith c o n s tru c tio n f r o m v a r io u s c a u se s, s u c h a s s tr ik e s , u n c e r ta in f o u n d a tio n s a n d to in s u r a n c e a g a i n s t fire a n d a c c id e n ts . T h e a g g r e g a te o f th e s e p e r c e n ta g e s v a r y a c c o rd in g to th e cla ss o f w o rk .
T h e se p e r c e n ta g e s a r e a d d e d to th e s u b s u m m a r ie s a n d th e to ta l r e p r e s e n ts th e c o s t to th e c o m p a n y o f th e p r o p e r ty d e ta ile d in th e e x h ib its .
D e v e lo p m e n t in c lu d e s c o s t o f y a r d a g e , c o n s tr u c tio n o f th e s h a f t b o tto m , a n d o f ro o m n e c k s in “ liv e ” t e r r i to r y ( u s u a lly b e tw e e n in s id e p a r t i n g s a n d w o rk in g f a c e s ) , a n d c a r r y i n g c h a r g e s d u r in g c o n s tr u c tio n f o r a p e rio d o f tw o to f o u r y e a r s w h ile o p e n in g th e m in e , in c lu d in g ta x e s , i n t e r e s t , a n d le g a l e x p e n se s.
M in e ra l r i g h t s o w n ed a r e v a lu e d on “ g o in g v a lu e ” o f s im ila r b lo c k e d -o u t a c re a g e s in th e field, a n d le a se d a c r e a g e s on th e d if fe r e n tia l b e tw e e n th e v a lu e o f le a se s in co n n e c tio n w ith p r o p e r ty a n d p r e s e n t “ g o in g ro y a l
t i e s ” in th e field.
T h e a d d itio n a l la b o r in v o lv e d in m a k in g a n a p p r a is a l e q u iv a le n t to a n a c c u r a te in v e n to r y is w ell ju s tif ie d b y th e u se s to w h ic h su c h a re c o rd m a y b e p u t, f o r i t m a y th e n b e th e official re c o rd f o r th e p u r c h a s in g a g e n t in re p la c in g o r d u p lic a tin g p a r t s , f o r th e sa le s d e p a r tm e n t in th e m a t t e r o f siz e s a n d p r e p a r a tio n e q u ip m e n t, f o r th e a u d i to r f o r a d j u s tm e n t o f fixed p r o p e r ty v a lu e on th e books, f o r th e fire, to r n a d o a n d o th e r in s u r a n c e p o lic ie s, a n d th e like. T h e b e s t ev id e n c e o f go o d field w o rk b y a n e n g in e e r is a s e t o f n o te s t h a t c a n b e r e a d ily in te r p r e te d by th e office fo rc e w ith o u t c o n ta c t o r e x p la n a tio n by th e m a n w h o to o k th e m , b u t b e c a u s e o f th e n u m b e r a n d v a r ie ty o f ite m s in a coal m in e in v e n to r y i t is b e s t to h a v e th e field m e n a t le a s t a id in th e office c a lc u la tio n s.
In c l u d e Ph o t o s o f Pr o p e r t y
S m all p h o to s o f th e b u ild in g s a n d s t r u c t u r e s sh o u ld a lw a y s be ta k e n , a s a p ic tu r e g iv e s a t a g la n c e th e c h a r a c t e r a n d ty p e o f th e p la n t a n d p e r m i ts o f p r o m p t g e n e r a l c la ssific a tio n o f th e p r o p e r ty . T h e s e p h o to s sh o u ld be n e a tly g r o u p e d a n d re d u c e d d o w n to n o t m o re th a n e ig h t p ic tu r e s to a s t a n d a r d sh e e t. C le a r t i t l e s o r d e s c r ip tio n s sh o u ld b e w r i t t e n on ea ch .
A m a p o f th e p r o p e r ty sh o u ld a lw a y s a c c o m p a n y th e a p p r a is a l a n d sh o u ld b e d r a w n on a sc a le sm a ll e n o u g h to p e r m it o f r e a d y r e f e r e n c e . A la rg e -s c a le m a p is u n w ield y a n d su fficie n t d a t a u s u a lly c a n b e in c o r p o r a te d in a n e a t, sm a ll d r a w in g . T h e s e m a p s sh o u ld sh o w lo c a tio n o f b u ild in g s a n d s t r u c t u r e s w ith g o v e r n in g d im e n sio n s (e s p e c ia lly f o r fire in s u r a n c e r e c o r d s ) , th e s u r fa c e ow ned a n d le ase d , th e m in e r a l r i g h t s o w n e d a n d leased , w o rk e d -o u t a r e a , etc. a n d i f m o re th a n one w o rk a b le se a m is p r e s e n t i t is o f te n d e s ira b le to h a v e a s e p a r a te m a p s h o w in g p r o p e r ty r i g h t s f o r e a ch se a m .
T h e re p la c e m e n t c o s t o f e q u ip m e n t a n d d e v e lo p m e n t is sim p ly a m a t t e r o f c a lc u la tio n a n d r e f e r e n c e to d a t a s h e e ts o r files f o r u n i t p r ic e s . F o r check, t h e to ta ls sh o u ld b e c o m p a re d w ith s im ila r ite m s in o th e r a p p r a is a ls . I f th e e n g in e e r h a n d lin g th e w o rk h a s n o
2 7 8 C O A L A G E Vo l.28, No. 9
a c c u m u la te d d a t a o r c o s t re c o rd s on c o a l-m in e e q u ip m e n t, i t w ill be e x c e e d in g ly difficult to p la c e p r ic e s on th e in n u m e r a b le ite m s e n te r e d on th e in v e n to r y s h e e ts , a n d th o u g h i t is, o f c o u rse , p o ssib le to o b ta in th e in f o r m a tio n f r o m th e v a i'io u s m a n u f a c tu r e r s , th e tim e a n d c o st o f su c h a la b o rio u s s e a r c h g e n e r a lly r u le s o u t t h e u n e q u ip p e d e n g in e e r f r o m t h i s c la ss o f w o rk u n le s s a p p r o x im a te fig u re s w ill suffice.
T h e v a lu a tio n o f u n d e r g r o u n d d e v e lo p m e n t, e n trie s , h e a d in g s , etc. is a m u c h d is p u te d q u e s tio n , b u t in th e a b s e n c e o f a n y s ta n d a r d o r fixed f o rm u la f o r d e t e r m in in g a f a i r v a lu e f o r th is i m p o r ta n t ite m in th e a p p r a is a l, it is m y c u s to m to c r e d it th e m in e w ith th e r e d u p lic a tio n c o s t o f th e m in e b o tto m , th e p a r ti n g s , th e ad v a n c e d d e v e lo p m e n t in s id e th e p a r ti n g s , a n d a n y ite m o f c o n s t r u c t i o n t h a t f a i r l y a n d p r o p e r ly c a n b e c h a r g e d to
c a p ita l a c c o u n t r a t h e r th a n o p e r a tio n , a n d th e n d e p r e c i a te d a c c o rd in g to c o n d itio n a n d m in e life .
T h e r a il, tr o lle y w ire , p ip e , etc. b e tw e e n m in e b o tto m a n d p a r t i n g is g iv e n a d e p re c ia te d r e p la c e m e n t v a lu e b u t no c r e d it is allo w ed f o r h a u la g e r o a d s o r a i r c o u rs e s b e tw e e n th e s e tw o p o in ts on th e th e o r y t h a t t h e i r v e ry e x is te n c e f o r m s a p e n a lty to th e o p e r a tin g c o s ts w h e n c o n s id e r in g re p la c e m e n t v a lu e s f o r c o m p a ris o n w ith a n e w m in e in v ir g in a c r e a g e . T h is m e th o d m a y n o t be sc ie n tific b u t it g iv e s a f a i r l y a c c u r a te fig u re on th e c o s t o f r e p la c in g th e e x is tin g w o rk in g s w ith a n o p e r a tio n d eveloped f o r th e s a m e o u tp u t.
T h e a c r e a g e o r m in e r a l v a lu a tio n is u s u a lly th e m o s t d ifficu lt p a r t o f th e w h o le w o rk . T h e v a r ia tio n o f a fe w d o lla rs p e r a c r e o r a f r a c ti o n o f a c e n t p e r to n o f coal in th e g ro u n d m a y b e su fficien t, in a la r g e t r a c t , to w ip e o u t th e to ta l re p la c e m e n t c o s t o f th e im p ro v e m e n t, a n d th e r e a r e so m a n y th e o r ie s o f v a lu a tio n o f a v a ila b le m in e r a l t h a t a v e r ita b le m a z e o f p ro b le m s c o n f r o n ts th e e n g in e e r in h is e ff o rts to a b s o rb , c o n s o li
d a te a n d re d u c e to d e fin ite te r m s th e d e m a n d s o f th e c o n flic tin g in t e r e s t s a n d a lle g e d a u t h o r i t i e s on t h i s q u e s tio n .
Sh o u l d Es t a b l i s h Re p l a c e m e n t Co s t
H o w e v e r, i f th e e n g in e e r w ill o n ly k e e p c le a rly in h i s m in d th e f a c t t h a t h is m a in e f f o rt is to s e t u p a s t a te m e n t o f re p la c e m e n t co st, th e p ro b le m is re d u c e d to i t s s im p le s t te r m s a n d h is v a lu e p e r a c r e a u t o m a t i
c a lly is p la c e d a t th e g o in g v a lu e o f s im ila r coal la n d i n th e field, a n d th e p r ic e o f la n d a s e s ta b lis h e d by r e c e n t d e a ls b eco m es th e b a s is o f h is c a lc u la tio n s w h ic h a r e a d j u s te d a r b i t r a r i l y f o r local o r sp e c ia l c o n s id e r a - o tio n s .
On le a se h o ld s i t se e m s f a i r to b a s e th e v a lu e s on th e d if fe r e n tia l b e tw e e n th e g o in g r o y a lty o f th e field a n d t h a t specified in th e le ase , a n d i f t h e r e is n o d iffe r e n tia l i t is th e w r i t e r ’s c u s to m to g iv e n o c r e d it to th e p r o p e r ty f o r le a se d coal— a lw a y s r e m e m b e r in g t h a t th e a p p r a is a l is a re p la c e m e n t p r o p o s itio n a n d n o t a s t a t e m e n t o f v a lu e b a s e d on e a r n in g c a p a c ity w h ic h is an e n tir e ly d if fe r e n t th in g .
A c c o m p a n y in g e v e ry a p p r a is a l th e r e s h o u ld b e a v a lu a tio n a s e s ta b lis h e d on a b a s is o f s a f e ly a n tic ip a te d p ro fits, c a p ita liz e d on a b o u t a s e v e n p e r c e n t a n n u a l d iv id e n d a n d r e f u n d in g c a p ita l b y r e in v e s tm e n t o f a s in k in g f u n d a t f o u r p e r c e n t. T h is s ta te m e n t, w h e n c o n s e r v a tiv e ly w o rk e d u p a s to d a y s o f o p e ra tio n , a n n u a l o u tp u t a n d p ro fit p e r to n , e i t h e r a s s u m e d o r d e t e r m in e d f r o m p a s t re c o rd s , p ro v id e s a c h e c k on th e p h y s ic a l v a lu e o f th e p r o p e r ty a n d g iv e s, u ^ d e r fixed
R elation of Mine W orkings to P ro p e rty
T h is ty p ic a l m a p , a v a lu a b le p a r t o f a n y go o d a p p r a i s a l , in d i
c a te s th e siz e a n d lo c a tio n o f th e u n d e r g ro u n d w o r k in g s , so m e o f th e lo c a l g e o lo g ic a l c o n d itio n s , th e b o re h o le s on th e p r o p e rty , th e lo c a tio n o f th e r a i l r o a d t h a t s e rv e s th e m in e , th e s u r f a c e b o u n d a r ie s a n d th e lik e.
a s s u m p tio n s , a go o d id e a o f th e p o s s ib ilitie s o f th e p r o p o s itio n fro m a b u s in e s s v ie w p o in t.
T h e c a p ita liz a tio n o f a n t ic i p a te d p ro fits is m e re ly th e c a lc u la te d w o rth o f th e b u s in e s s a.s a n in v e s tm e n t a t se v en p e r c e n t o r te n p e r c e n t o r w h a te v e r one m a y c o n s id e r a f a i r r e t u r n on h is m o n e y . T h e e n g in e e r f ir s t fin d s th e to ta l a v a ila b le to n n a g e , a s s u m e s a f a i r r u n n in g tim e , a n a n n u a l o u tp u t, a n d f ig u re s th e lif e o f th e o p e ra tio n . W ith t h i s b a s ic d a t a a n d a n a s s u m e d p r o fit p e r to n h e m a y c a lc u la te th e a n n u a l d iv id e n d a n d e s ta b lis h th e r e f r o m b y r e f e r e n c e to ta b le s , i f d e s ire d , th e p r e s e n t w o r th o f su c h a d iv id e n d .
I f th e a s s u m p tio n s a s to o u tp u t a n d p r o fit a r e c o r r e c t t h i s m e th o d d e te r m in e s th e t r u e w o r th o f th e o p e ra tio n , a n d th e re p la c e m e n t c o s t is m e re ly a ch e ck to find th e a p p r o x im a te a m o u n t o f m o n e y n e c e s s a r y to e s ta b lis h a b u s in e s s t h a t w o u ld p ro v id e s im ila r u ltim a te fin a n c ia l r e tu r n s .
T h e th e o r y o f z o n in g m in e r a l r i g h t s a v a ila b le to e x i s tin g o p e r a tio n s a n d e s ta b lis h in g v a lu e s p e r to n o r p e r a c re on a s lid in g s c a le a d j u s te d to tim e p e r io d s o f e x tr a c tio n h a s n o p la c e in th e sc h e m e o f th i n g s w h en re p la c e m e n t c o s t is c o n s id e re d , b u t is p r o p e r ly a p p lic a b le to a s e t-u p on a c o m p a n y ’s b o o k s f o r th e p u r p o s e o f s c ie n tific a m o r t iz a tio n o f p r o p e r ty , s in c e th e zo n e o f th e coal se a m b e in g w o rk e d a t p r e s e n t is a p p a r e n tly o f g r e a t e r v a lu e to th e o p e r a to r th a n th e coal in th e zone te n y e a r s la te r .
T h e w o rd “ a p p a r e n tly ” is i n s e r t e d ab o v e to av o id c o m m ittin g m y s e lf to t h i s th e o r y w h ic h is p ro v o c a tiv e o f m u c h d is c u s s io n a n d m a n y s e d u c tiv e a r g u m e n ts . S p a c e lim its th e e la b o r a tio n o r a n a ly s is o f th e zone th e o r y a s a p p lie d to coal la n d v a lu a tio n s .
T h e lo g ic al a n s w e r to th e v a r io u s o b je c tio n s to a p p r a is a ls f o r m i n g th e b a s is o f a fin a n c ia l s e t-u p is to p ro v id e a n e n g in e e r ’s r e p o r t w h ic h s h a ll s e t f o r t h c le a rly , f e a r le s s ly , a n d c o n s e rv a tiv e ly th e g o v e r n in g , a s w ell a s th e s m a lle r f a c to r s t h a t h a v e to do w ith th e o p e r a tin g a n d b u s in e s s p h a s e s o f th e p r o p o s itio n . A lso a n a u d i t o f th e books s h o u ld be p r e p a r e d b y a u d i to r s sk ille d in t h i s sp e c ia l b r a n c h o f i n d u s t r y . T h e a u d i to r
Au g u s t 27, 1925 C O A L A G E 279
sh o u ld b e a b le to u n d e r s ta n d a n d a p p r e c ia te th e effec t
■of w a r y e a r s a n d o f “ f a t ” b u t s h o r t c o n t r a c ts on th e r e c o rd o f e a r n in g s , a n d so a r r a n g e h is r e p o r t a s to re fle c t, i f p o ssib le , th e c o n d itio n s o f th e b u s in e s s in n o r m a l p e rio d s . T h e e n g in e e r, i f q u a lifie d f o r su c h s e rv ic e , w ill be g o v e rn e d in h is a n a ly s is b y n o rm a l c o n d itio n s r a t h e r th a n e i t h e r th e s u b n o r m a l o r th e e x c e p tio n a l.
A c c u ra c y a n d k n o w le d g e o f w h e r e to find th e p e r t i n e n t f a c t s in th e r e c o rd s , a s w ell a s a b i lity to s e t th e m o u t p r o p e r ly in h is r e p o r t is th e p r o v in c e o f th e a u d i t o r , f o r h is w o rk is m a in ly m e c h a n ic a l o r c le ric a l, in s o f a r a s t h i s p a r t o f th e jo b is c o n c e rn e d . H e s h o u ld n o t be e x p e c te d to s u b m it c o n s tr u c tiv e c r it ic is m on th e p r o p o s itio n a s a w h o le a s d e d u c ed f ro m th e fig u re s o n h is b a la n c e s h e e ts , f o r t h i s r e q u ir e s a d e ta ile d k n o w le d g e o f th e o p e ra tio n w h ic h he, in all f a ir n e s s , sh o u ld n o t be e x p e c te d to p o sse ss a n d is, w ith o u t q u e s
tio n , th e o b lig a tio n a s s u m e d b y th e e n g in e e r in a c c e p tin g th e c o m m issio n o f m a k in g a r e p o r t.
En g i n e e r Sh o u l d Ac c e p t Re s p o n s i b i l i t y
A m in i n g e n g in e e r ’s r e p o r t h a s to do w ith a n y a n d a ll f a c to r s e n t e r i n g in to th e p ro b le m a s a w ho le. T h e s u m m a tio n o r co n c lu sio n s in t h e r e p o r t a r e o f te n th e o n ly p a r t r e a d by th e b a n k e r . T h is se c tio n s h o u ld be c le a r, c le a n -c u t, b r i e f a n d f r e e o f q u a lific a tio n s . • I f i t is p o ssib le , th e e n g in e e r sh o u ld s a y “ y e s ” o r “ n o ” a n d a c c e p t r e s p o n s ib ility . I n o th e r w o rd s , th e e n g in e e r s h o u ld e i t h e r a c c e p t o r r e je c t, f o r th e p r o p o s itio n is e i t h e r good o r n o t good f r o m th e v ie w p o in t o f a n in v e s to r in b o n d s. T h e r e is no m id d le g ro u n d , f o r t h e f ir s t c o n s id e r a tio n o f a m o r tg a g e is s e c u r ity a n d i f a n y g a m b lin g e le m e n t is in tr o d u c e d in to th e sc h em e o f th in g s , a b o n d is s u e sh o u ld be a u to m a tic a lly r u le d o u t.
E n g i n e e r s ’ r e p o r ts on coal p r o p e r tie s , i f m a d e in c o n n e c tio n w ith a p r o p o s e d b o n d is s u e o r f o r sa le a n d p u r c h a s e , m u s t o f n e c e s s ity co v e r a lm o s t e v e ry c o n c e iv a b le a n g le o f th e o p e r a tio n a n d , o f c o u rse , no in flu e n c e o r p r e ju d ic e o f a n y k in d w h a ts o e v e r sh o u ld
T ypical P ro p e rty Map
T h e e n g in e e r ’s a p p r a i s a l s h o u ld b e a c c o m p a n ie d b y a g o o d m a n y i llu s t r a t i o n s lik e th is , to sh o w r e a d ily so m e o f t h e m a in f e a t u r e s o f th e p r o e rty . T h is o ne, f o r in s ta n c e s , sh o w s th e s u r f a c e o w n e d , th e c o a l o w n e d a n d le a s e d , a f a u l t lin e t h a t c ro s s e s th e se a m , d r i ll h o le s, e tc .
affec t o r color e i th e r th e s ta tis t ic s , re c o m m e n d a tio n s , c ritic is m s o r r e m a rk s . T h e r e p o r t on a m in e sh o u ld re a d a lik e f o r th e b u y e r o r s e lle r a n d sh o u ld be in its essen ce sim p ly a s ta te m e n t o f f a c ts a n d c o n d itio n s a s fo u n d , to g e th e r w ith a n h o n e s t, u n b ia s e d a n a ly s is o f th e p r o p o s itio n in w hole a n d in p a r t , a n d a d e fin ite re c o m m e n d a tio n a s to th e m a in q u e s tio n i f t h a t is possible.
T h e re is no re a s o n w h y th e e n g in e e r sh o u ld confine h is in v e s tig a tio n s a n d r e m a rk s to th e p u r e ly te c h n ic a l o r s ta tis t ic a l p h a s e s o f th e w o rk ; in f a c t, t h e r e is ev e ry re a so n w h y a c o m p e te n t c o n s u ltin g e n g in e e r m u s t n ot, a n d i t sh o u ld be b o th h is p r iv ile g e a n d h is d u ty to a d ju d g e th e opei’a tio n f r o m th e c o m m e rc ia l a n g le , a s w ell a s th e e n g in e e r in g . O fte n th e p h y s ic a l p r o p e r ty r a te s h ig h in th e scale o f f a c to r s t h a t m a k e up th e m e a s u re o f th e t r u e w o rth o f a m in e , b u t b e c a u s e o f h ig h f r e i g h t r a te , lack o f m a r k e ts , la b o r s h o r ta g e , o v e r-p ro d u c tio n in th e field, o r o th e r c a u s e s g e n e ra lly co n sid ered o u ts id e th e p ro v in c e o f a s t r i c t l y e n g in e e r in g r e p o rt, th e o p e ra tio n m a y be h o p e le ss so t h a t a n y p h a s e o f th e p ro b le m t h a t a ffe c ts th e fin al a n s w e r o f
“y e s ” o r “ n o ” m u s t be c o n s id e re d a n d w e ig h e d . I n v e s tig a tio n s a n d r e p o r ts t h a t h a v e to do w ith o p e r a tin g m a tte r s , efficiency, s a f e ty , th e s y s te m o f m in in g , fires, e x p lo sio n s o r a n y o f th e d if fe r e n t p h a s e s o f m in in g a r e p ro b le m s r e q u i r i n g sp e c ia l t r e a t m e n t a n d h a n d lin g in e a ch ea se . A lth o u g h th e r e m a y b e som e a tte m p t a t s ta n d a r d iz a tio n a s to th e f o rm o f th e r e p o r t, th e r e seem s to b e no su c h n e c e s s ity a s o b ta in s in r e p o r ts f o r th e p u rp o s e o f m a k in g a lo a n o r a p u rc h a s e . T h e m a x im u m o f p e r t i n e n t d a t a in th e m in im u m o f sp a c e sh o u ld be th e a im o f th e e n g in e e r in w r i t i n g u p h is r e p o r t a n d sin c e i t is re a d , a s a ru le , b y th o s e n o t v e rse d in te c h n ic a l la n g u a g e , h e sh o u ld e x p r e s s h im s e lf c le a rly a n d s im p ly so th e r e sh a ll b e no a m b ig u ity o r p o ssib le m is u n d e r s ta n d in g .
Su m m a r y o f Re p o r t Im p o r t a n t
T h e s u m m a r y o r r e c a p itu l a ti o n o f th e r e p o r t is th e b ea d o f th e a s s a y a n d sh o u ld be r e c o rd e d o n ly a f t e r a th o ro u g h a n d c a r e f u l a n a ly s is , f o r th e c o n c lu sio n r e a c h e d b y th e e n g in e e r sh o u ld b e th e r e s u l t o f c o n s c ie n tio u s s tu d y o f th e p ro b le m a t h a n d jo in e d u p w ith h is ju d g m e n t a s o b ta in e d f r o m good e x p e rie n c e a n d e x p re sse d in d e fin ite te r m s a n d c le a r la n g u a g e .
T h e fo llo w in g s t r u c t u r e is s u g g e s te d a s th e f r a m e w o rk f o r a r e p o r t on a coal m in in g p r o p e r ty , a n d i ts e la b o ra tio n “ u p ” o r “ d o w n ” is a m a t t e r o f th e r e q u i r e m e n ts o f th e in d iv id u a l c a se a n d th e ju d g m e n t o f th e e n g in e e r. T h e s c h e d u le is s u b m i tte d a s f a i r l y r e p r e s e n ta tiv e o f th e d a t a r e q u ir e d f o r w h a t is k n o w n a s a co m p lete r e p o r t b u t, o f c o u rse , m a y be c o n d e n se d o r b r ie f e d i f th e c lie n t se e k s in f o r m a ti o n o r a d v ic e o n ly on specified ite m s o r se c tio n s . T h is e n t i r e s t r u c t u r e sh o u ld b e co m p leted in c a se s o f p u r c h a s e o r sa le, n o t only f o r p r o te c tio n o f th e e n g in e e r h im s e lf b u t f o r in f o r m a tio n o f all c o n c e r n e d :
O utline of R e p o rt on Coal P ro p e rty A — L o c a tio n :
1. (a) N am e of com pany, (b) geo g rap h ical location, (c) coal field.
2. (a) T opography, (b) ra ilro a d s se rv in g p ro p e rty , (c) tow ns fu rn ish in g la b o r supply.
B — F ina n cia l s tr u c tu r e :
1. W hen organized and u n d er laws of w h at sta te .
2. T otal ca p ita liz atio n : (a ) P a r value of common stock, (b) p a r value of p re fe rre d stock, (c) am o u n t o f each o u t
sta n d in g , (d) am o u n t of each unissued, (e) bonds o r o th e r
