THE VALUATION OF MINES AND OIL PROPERTIES 241
mination of all the elements that have a bearing on the values
is necessary. The estimated profits capitalized furnish the
foundation for a valuation of the ore bodies or deposits. These
profits are dependent on the sales value of the product, the
geological structure of the deposit, the cost of mining (present
and future), the cost of surface treatment, and other factors.
In fixing the value of coal lands use can be made of the foot-
acre ” method of valuing coal lands provided account is taken
of the fact that a foot-acre of coal in a thin vein is not so valuable
as it is in a thick vein. The sales of adjoining properties will
be of assistance to the engineer in fixing a value, particularly in
case of coal lands which have not been explored but which con-
tain the same beds and show geological conditions similar to
properties that have recently changed hands. The © royalty
value ”” should not be ignored and when properly determined
furnishes a valuable check on the valuation.
When account has been taken of the risks of operation, the
geological features of the deposit and the economics of the
necessary surface plant, the total prospective estimated profit
can be suitably discounted and a certain definite valuation
placed on the property. In determining the present value of a
property for which the profits have been estimated, it is necessary
to remember that certain fixed charges such as replacements,
sinking fund payments (paid or not paid), etc., are to be deducted
before the profits are capitalized.
A mining property to be a good investment must promise to
an investor the return of his capital in addition to interest on
the capital at a rate commensurate with the risk he takes in
investing in such a property. What the risk will be should be
determined by the investor before he makes the investment.
Comparison of the proposed investment with certain standard
investments such as government bonds, railroad bonds and real-
estate mortgages should be made.
Proper Rate of Interest. — The proper rate of interest on
mining investments has been and still remains the subject of
much discussion among engineers. A reasonable solution of
