THE VALUATION OF MINES AND OIL PROPERTIES 243 
It is a fact that industrial enterprises because of additional 
risks demand greater interest returns than Government bonds 
and it seems reasonable that mining investments taken as a 
class should call for a greater rate of interest than industrial 
enterprises. 
This claim for a higher rate of interest is opposed by such an 
authority on mine valuation as Mr. J. R. Finlay * who can be 
quoted as follows: 
“ Ihave generally assumed that 5 per cent was a normal inter- 
est — or discount rate. If that is so, it is a fair figure to use in a 
mine valuation, which should be nothing but a candid inquiry 
into the present value of expected profits.” 
If Mr. Finlay’s statement is correctly understood, he is willing 
to ignore the risk that these prospective profits may be dimin- 
ished or may entirely be cut off before the estimated life of the 
property has been accomplished. If it is true that at any min- 
ing property risks exist over and above the risks existing in 
so-called “safe” investments, then a 5 per cent discount or 
interest rate is not sufficient to induce sane investment. Mr. 
Finlay’s 5 per cent interest rate, as applied to the iron mines of 
Michigan in his appraisal made for the State Tax Commission 
in 1911, was changed by that Commission to a 6 per cent basis 
in 1913. 
Other authorities have gone on record as advocating higher 
interest rates and in this connection the following will be found 
of interest: 
Mr. J. H. Curle | states that a suitable mining investment 
must fulfill the following requirements: 
“ 1st. The development in the bottom must be good; 
“2nd. The mine must pay 10 per cent per annum; 
“ 3rd. There must be 60 per cent of the price of the shares in 
sight.” 
Mr. Hoover in his admirable work on mine valuation says: } 
* J. R. Finlay, “Valuation of Iron Mines,” Trans. A.LM.E., Vol. 45, P- 295. 
t J. H. Curle, “The Economist,” London, Sept. 15, 1903. 
I H. C. Hoover, “Principles of Mining,” 1909.