242 VALUATION, DEPRECIATION AND THE RATE-BASE
the problem has not been advanced and it is the belief of the
author that it is not possible to determine a rate of interest
that would apply equally well to all mining investments. The
risk incurred by investing in a property that has been slightly
developed is much greater than the risk in the case of a well-
prospected ore body even when the mines contain similar ores
and will be operated under similar conditions. Then again the
average risks in copper mining differ from the average risks in
gold mining and so on.
Mr. H. C. Hoover has tabulated the risks of mining as follows:*
“1. The risk of continuity in metal contents beyond the
sample faces.
“2. The risk of continuity in volume through the blocks
estimated.
“ 3. The risk of successful metallurgical treatment.
“4. The risk of metal prices, in all but gold.
“5. The risk of properly estimating costs.
“6. The risk of extension of the ore beyond exposures.
“#7. The risk of management.”
Several of these risks are found in industrial enterprises
(Risks 4, 5 and 7). The risks of continuity of ore body and of
ore values are peculiar to the mining industry. The limited
market for the mineral products and the effect of the volume of
the output on the prices that can be obtained increases the risk
that capital must take. The problem of obtaining proper metal-
lurgical treatment is an important one particularly when start-
ing operations at new properties. The fact that the mineral
constituents of the ore may change as greater depths are reached
and that the previously satisfactory flow sheet may no longer
realize the percentage of extraction on which the profits were
based cannot be ignored by the investor. The interest return
that might be attractive to an investor in a proven district
might not be sufficient to attract capital in a district where the
mines are still prospects and where the depth of the mineraliza-
tion has not been tested.
* H. C. Hoover, “Principles of Mining,” 1909.
