– The Business Side of Mining –
By: Shawn Larson, Denver Stock Exchange
The history of mining in Colorado has proven to be one filled with complications due to scarce surface ore, deep-running ore veins, high water tables, harsh weather conditions, treacherous geography, and ores tied up in country rock requiring new and expensive refining techniques and technologies to extract. This all adds up to an expensive proposition to make a mine produce at profitable levels. The average prospector was not able to take on this endeavor alone; he needed capital. Without vast sums of capital, mining in Colorado would have never gotten off the ground…or into the ground as it were.
In order to raise this capital, the prospector needed investors. Investors from the eastern United States were generally anxious to invest in the New West with the vision of finding great wealth in a rich mining strike. But there was another problem; how were those with the capital and those with the mining claims to be brought together? This is where the mining stock promoter and stockbrokers entered the picture.
Leading up to the turn of the century, mining was king of Colorado industries, and mining stock promoters and stockbrokers were an integral part of the business. The activities of raising capital and selling shares were often tied very closely together – sometimes performed by the same individual or firm. There were no strict regulatory rules and laws guiding the stockbroker as there are today. Many tactics were used to grab the attention of the investing public and entice them to invest in any particular promoters’ property. Much of this “publicity” and “advertising” was not only questionable in nature and fact, but often times downright false.
Promotional booklets, advertisements in mining periodicals and local newspapers, even the company prospectus itself were utilized to hype mining properties. While not all of these promotions were without fact, it is safe to say there was a good deal of “verbal salting” of the mines. For every mine that was a legitimate producer and whose stock was a reasonable investment, there were dozens of others that were not so profitable…or even existed at all!
The great mining camp of Cripple Creek and the sophisticated population of nearby Colorado Springs were a hotbed for mining stockbrokers and promoters. The would-be investor, by means of various sources, could purchase and sell mining company stock quite readily. By the middle of the 1890’s Cripple Creek boasted three stock exchanges, but the largest exchange was the Colorado Springs Mining Stock Exchange. The individual broker was able to sell shares that were traded on the mining stock exchange or out of their own offices, selling shares from their own inventory in companies they were personally promoting. The “Change” was the most visible and regulated venue that undoubtedly served as a meeting place for highly regarded men of the communities. Men of the mining stock exchanges were thought of very highly by the business community and utilized this popularity and exposure to promote their businesses, mines and other interests.
Many brokers published weekly market update and stock price quote sheets to promote themselves and the stocks they were selling. Others created more elaborate publications to promote the companies they owned or controlled. One such example is the Woods Investment Company. The Woods brothers were members of the Colorado Springs Mining Stock Exchange and heavily promoted their towns, vast mine holdings and other businesses. The Woods brothers had mining interests not only in the Cripple Creek District, but also in Mexico. They promoted their mines throughout the United States, as can be seen by this promotional booklet published for the 1901 Trans-Mississippi Exposition.
The Woods Investment Company was one of the largest brokerage firms in Colorado Springs at the turn of the 20th century and controlled a great deal of real estate, mines and other business assets in the Cripple Creek District. Many of the Woods’ mining properties were large producers and dividend payers while their other businesses provided goods and services to the community.
Another method mentioned to attract investors was for the broker/promoter to produce glowing reviews of their holdings in a prospectus. An example here is from the Canton Gold Mining and Milling Company. The promotions from this company seemed to be based more on hype than facts. In the Canton Gold Mining and Milling 1899 prospectus, while describing their properties located in the northern boundaries of the District, they declare; “There seems to be no well-defined limits or boundaries of the mineralized area.” We know, by way of numerous USGS publications, that the productive boundaries of the District were in fact quite well defined. The prospectus neglects to point out that the Canton properties were located well outside the accepted productive zone of the District.
Another promotional publication from this company focuses on the many stocks from the Cripple Creek District that were once “low-priced” and had advanced making investors rich, meanwhile devotes a mere quarter of the publication to their own stock and in one paragraph states rather boldly regarding their own future: “The Canton Gold Mining and Milling Company is offering just such a stock that will show a large percent of profit on the investment.” Promotions of this nature were obviously designed to play on the popularity and prosperity of the District and not on the facts or reasonable expectations for the future of the mines or claims they possessed.
Many of the stockbrokers were quite well known in the District and produced more generic publications promoting the entire district. Jno. W. Proudfit & Co. was one of many such companies. Through the publication of annual hand books, Proudfit provided a service to investors by publishing information about the major mining companies within the district, most of which were listed on the Colorado Springs Mining Stock Exchange. Included in this publication is a listing of the companies, identification of their directors, description of the properties and an approximate financial status of the company as well as a map of the Cripple Creek District. Weekly newsletters were also published to keep investors and prospects apprised of events on the exchange and developments in the mines. The information included was based on facts provided from the companies regarding production, payment of dividends and stock price movement on the exchange.
There seemed to be no end to the number of stockbrokers in Colorado Springs and Cripple Creek willing to buy and sell mining stocks for investors. This, it seems, would have been overwhelming to the would-be investor, but today provides an amazing array of historical documents for the collector.
The creation of wealth and the physical stock certificate can be directly related to the mining stockbroker and promoter. Their work and publications can be seen and collected today in the form of not only the publications described above, but also the very stock certificates that many of us collect. Were it not for the stockbroker, we would not have so many wonderful stock certificates available for our own collecting interests.