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 interest
 — 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 diminished
 or may entirely be cut off before the estimated life of the
property has been accomplished. If it is true that at any mining
 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.