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British Impact on the Utah Mining Industry
BRITISH IMPACT ON THE UTAH MINING INDUSTRY
BY W - TURRENTINE JACKSON
Although the Mormon pioneers who settled the region to the south of the Great Salt Lake knew of the presence of useful metals like iron, in 1849-50, information about the available precious metals was uncertain for many years thereafter. The initial policy of the Church of Jesus Christ of Latter-day Saints in discouraging mining for precious metals was well-known, and the initiative in prospecting for the territory's hidden minerals was left to United States soldiers, first of all those stationed at Camp Floyd in 1858 and later by troops from California and Nevada. The most lasting economic result from the military occupation of the Mormon community during the Civil War was the encouragement given the mining industry.
The years 1863-70 may be described as the period of mining discovery in Utah. In Bingham Canyon no one was certain which of the metals deserved primary attention, for traces of gold, silver, copper, and lead were found in every conceivable chemical combination in the various districts that were established one right after the other. Across the valley of the Jordan River, its tributary streams flowing out of the Wasatch Range ran through canyons where scattered silver deposits were located. In spite of all the bustling activity, Utah's production of precious metals had not exceeded $200,000 in value by 1869. The mining population in the territory was estimated at 4,000 the next year.
Professor Leonard J. Arrington has suggested that Utah did not experience a mining rush comparable to that of California in 1849 and of Colorado and Nevada in 1859 because the Utah discoveries were small in number and wealth when compared with those unearthed in Idaho and Montana in these same years. Inadequate transportation made the movement of ore uneconomic. Moreover, the church leadership used every means at its command to prevent a mining excitement.
Transportation developments revolutionized the Utah mining industry in the early 1870's. The Utah Central Railroad, running south from the transcontinental to Salt Lake City, and the Utah Southern, running south from the capital city, entered the mining country and ran branch lines, sometimes narrowgauge, to the most active districts. Railroad construction not only made possible profitable working of the scattered mines, but opened up Utah Territory to outside labor and capital. The Mormon Church, somewhat belatedly, adjusted its attitude toward the mining industry by permitting members of the church who needed work to labor in the mines under the direction of the priesthood. However, the church was not prepared to go so far as to encourage its members to engage in promotional or speculative business affairs. One result was that six of the seven banks in existence in the territory in 1873 were initiated and owned by non-Mormons. Through these bankers, investors from the East and from abroad were encouraged to fill the vacuum in the economy and provide the capital for a comprehensive test of the territory's mineral potential. Dale Morgan has rightly noted that the mines underwrote Utah's first social revolution, known in history as the "Godbeite Movement."
The years that Utah was experiencing the end of isolation, 1869-73, coincided with the development of a great boom in overseas investments in Great Britain. As a part of the boom, companies were organized to operate mines throughout the world, including western America, to such an extent that London periodicals referred to the feverish activity as a "mining mania." The British risked an annual total of £40 million during 1872 and 1873. In western America alone there were 94 companies, representing an authorized capital of £18 million, or $90 million registered to engage in businesses related to the mining industry between 1870-73.
The silver mines of Utah had been brought sharply to the attention of the investing public in England as early as 1868 through the mining trade journals. Between 1871-73, the British sponsored 20 Utah undertakings, with an initial nominal capitalization of £3.17 million or over $15 million. Based on the number of companies organized during the boom, Nevada remained the favorite field for the location of British companies, California was next in line, with Colorado and Utah following close behind. Because of the heavy capitalization of three or four of the Utah enterprises, the financial stake of the British in Utah Territory was greater than that in Nevada or Colorado and approximately three-fourths of that in California. One Englishman observed in 1872, "Nevada and the whole neighborhood of Mormon land has already absorbed so much British capital, that the mines are more British than American."
By 1870, a modus operandi had evolved for the marketing of western American mines in London and the organization of limited liability companies to operate them that was destined to do irreparable damage to the mining industry. Vendors from the American West made "bonding contracts" with promoters to sell their properties at prices three or four times higher than they could command in the United States. The promoter usually organized a syndicate that, in turn, attempted to interest the public in investing in a public company. If this failed, the property reverted to the vendor and he could begin again. The public was invited to subscribe for shares through the issuance of a prospectus that was a widely circulated promotional document, full of exaggeration and occasional misrepresentation. Without shame, the promoters deleted any conditional phrases or qualifying statements from the official reports of mining engineers prior to using them in the prospectus. Moreover, in this period mining engineers were plentiful who, for an appropriate fee, would write optimistic reports that could be edited to suit the ends of both the promoters and the vendors. Abridged versions of the prospectus, dramatically displayed, were printed in the mining journals and newspapers, sometimes on several different pages in the same issue.
In addition to the abuses associated with the prospectus, company promoters did not hesitate to manipulate the market price of shares at the time of the initial offering to the public by forcing transactions on the stock exchange at or above the par value of the shares. If necessary, an initial dividend was paid out of capital on the first shares sold, without too great an expense, to drive up the market value and stimulate a brisk trade. Another means of making a company more attractive to investors was to obtain the services of a man of title or great business distinction as chairman of the board of directors. Handsome fees and blocs of shares were frequently offered as an inducement to acceptance of these posts. Often secret agreements, ancillary to the contract of sale, were concluded whereby the vendors offered the promoters a bloc of shares or a percentage of the money paid by the public for the company stock. The amount of the vendors' shares was public knowledge, but the promoters usually managed to have friends register the majority of their own shares. As the market soared upward, the promoter, by now in all probability an officer or director of the company, made public statements of his resolve to hold the shares officially registered in his name, but made no mention of those held in reserve by his friends who were selling to make maximum profits. The Companies Act of 1862 did require that every public company file an annual register of stockholders showing the names, addresses, and occupations of investors; the number of shares they held at filing time; and the number of shares traded during the year. This document could be inspected at the Companies Registration Office but few investors took such pains. In time, the "insiders" to a company promotion sold their shares without resorting to intermediaries because so few investors went to the trouble to inspect and analyze the document. As the story of British investment in specific Utah mining properties unfolds, the abuses associated with the selling of mines, company promotion, and the manipulation of shares, to mention only a few of the problems associated with the corporate mining industry, are painfully apparent.
British capital first came to Utah through the successful promotional activity of three syndicates. The first Anglo-American enterprise in the territory was the Utah Silver Mining Company, Limited, instigated by two Americans, I. C. Bateman and "Colonel" David Buel, and registered in July, 1871, with a capitalization of £140,000. Both men were well-known in western mining circles. Buel had been sent to the French Exposition in Paris in 1867 as a representative of the Reese River District, Nevada, amply supplied with ore samples that were certified by the authorities of the School of Mines in the French capital for an exposition medal. From Paris, Buel went to London. Noting that the "colonel" was making his presence felt in British financial circles, the American Journal of Mining expressed concern about the amount of space devoted to his activities by the London Mining Journal and the flagrant exaggeration of his statements. On Buel's return to the American West he formed a partnership with Bateman to purchase a series of claims in Bingham Canyon supposedly containing silver and lead, erected the Buel and Bateman Smelting Works, and organized the Utah Mining Company. The Salt Lake Herald thought no one could doubt the success of the enterprise and suggested that the new smelting works would "now convince the most skeptical of the possibility of a successful reduction of the Bingham canyon ores, which heretofore were erroneously set down as so refractory that it was deemed impossible to reduce them." After convincing Utah residents of the soundness of the mining operation, Bateman journeyed to London in search of capital for development work. He secured the services of George Batters, an English broker principally associated with the successful floating of several Anglo-American mining companies. The first requirement was to obtain reports from mining engineers. Henry Janin, an American, made an adverse report stating that the ore found in widely scattered pockets was low-grade. However, the British promoters sent out an English expert, "Captain" James Nancarrow, who had managed mines in Mexico, Spain, and Chile, to get an enthusiastic appraisal of the property. Then Henry Sewell, another English engineer, was employed to serve as "umpire" between Janin and Nancarrow, and he unhesitatingly sided with his fellow Britisher after visiting the Bingham Canyon claims. All doubt in the minds of investors apparently disappeared when Batters publicized the fact that Bateman had refused cash for his Utah company insisting on a partialpayment in shares to reserve an interest in the operation. In fact, public confidence was so high that the £10 shares sold at a 10J. premium. The public demand could not be met. Batters released a telegram from Bateman, refusing to sell any of his vendor's shares to interested Britishers. Thus nine mining claims in Bingham Canyon, including the Dartmouth, Portsmouth, Balshazzar, and Red Warrior mines, passed into the hands of the British company along with the Buel and Bateman Smelting Works. John R. Murphy, recommended by the American vendors as one of the most able smelterers on the Pacific Coast, was named superintendent. He immediately went to work releasing dispatches on the wonders of Bingham Canyon.
A second syndicate promoted the Emma Silver Mining Company, Limited, that was destined to become the most famous, or infamous, of all enterprises introduced to the British public in the 1870's. The undertaking was so large and the promotion so dramatic that the Emma Company immediately attracted world-wide interest. Within a month after launching the Emma Company, Erwin Davis, the San Francisco promoter, utilized his experience to sponsor the Flagstaff Silver Mining Company of Utah, Limited, to develop a mining claim 2,000 feet long on the same vein as that of the Emma. For the prospectus Professor Minos Claiborne Vincent of the Royal Geographical and Geological societies of London prepared an elaborate statement asserting among other things that a vein "of such richness and force, marked throughout with such indubitable character, cannot fail to be both productive and permanent." Professor William F. Blake, who had already lauded the Emma to the sky, reported that on the Flagstaff claim a rich vein was waiting to be stoped out. Superintendent Murphy added a favorable statement written from the Bingham Canyon headquarters of the Utah Silver Mining Company, Limited. The prospectus estimated the annual net profits at 36 per cent and promised dividends within two months after the company's registration. Davis gathered together a distinguished board of directors, quite distinct from that of the Emma, headed by the Right Honorable Lord Robert Montague. Sir Alexander Malet, an outstanding British statesman and diplomat, personally guaranteed that the resources of the company would be properly handled and assumed the title of trustee. The Flagstaff Company was capitalized at £300,000, second in size only to the Emma. Like that company, also, all the funds raised, £100,000, went to the vendors with the remaining £200,000 allotted to them as paid-up shares. The shares placed on the market were exchanged at a premium anywhere between £2 to £3 above the par value of £10.
Warren Hussey, president of the National Bank of Utah, played a significant role in marketing all three of these Utah mining properties. He encouraged Bateman to sell his mining claims and smelter in Bingham Canyon in London and from time-to-time advanced money to the manager of the Utah Silver Mining Company to carry him through a crisis. He also worked with Erwin Davis and Trenor W. Park in floating the Emma Mine and through Park made the acquaintance of Henry Sewell, the engineer. From his offices in Salt Lake City, Hussey next provided the funds to bond the Sparrow Hawk mines along a vein known as the Mormon Chief in the Camp Floyd District that Sewell thought promising. And he also paid the expenses of a "mining captain" named Shaw, whom Sewell recommended, to present the proposal for a company to prospective English investors. Hussey and Sewell between them provided letters of introduction to London friends and coached the captain on how to proceed in floating the mine. The prospectus of the proposed Camp Floyd Silver Mining Company, Limited, suggested that the district would soon rival the celebrated Nevada Comstock. The silver ore was reported to be "free milling," rich silver chloride. Samples picked at random and carted to Salt Lake City by wagon and shipped by rail to Reno for smelting had yielded an average of $350 a ton.
In London, Shaw sought out George Batters who agreed to serve in the dual role of promoter and chairman of the board. Financiers and investors who had been associated with him in the Utah Silver Mining Company also backed the Camp Floyd Company, and the impression was left that the same syndicate would dominate the policy of both.
Although these syndicates had a tendency to monopolize the attention of British investors interested in Utah mines, several smaller companies were registered in 1871-72 taking advantage of the sudden popularity of Utah Territory in London. In fact, Utah had such a splendid reputation in London financial and investment circles in 1871 that six out of the eight companies registered that year included the word "Utah" in their official titles. Captain Nancarrow, who apparently spent most of his time that year touring the various mining districts of Utah locating and recommending promising claims for British promoters, endorsed the Silver Hill Mine in Little Cottonwood Canyon that was sold to the South Utah Mining Company, Limited. A fourth British concern in the Little Cottonwood District was the Davenport Mining Company, Limited, that acquired both the Davenport and Matilda lodes. From the very start interested observers reported that the British expenditure here was liberal, if not lavish. A hoisting works was placed in the mine; a tramway was built to connect the mine with ore bins on Grizzley Flat where wagons were loaded to convey the ore to two furnaces built at the mouth of the canyon. A steam mill was built at Grizzley Flat, and a small settlement grew up around it. At Bingham, the Saturn Silver Mining Company of Utah, Limited, was incorporated to acquire a property known as the "Idaho" on the Great Saturn Lode in the West Mountain Mining District. The prospectus was full of exaggeration stating that "this LODE is represented to be eleven feet thick, solid silver and lead bearing ore." The location was also described as strategic, just across the valley from the famous silver mines of the Little Cottonwood District including the lengendary Emma! In addition to the concentration of effort in Bingham and Little Cottonwood canyons, the British also purchased the Mammoth Copperopolis Mine in the Tintic District, Juab County, 75 miles south of Salt Lake City. Several shipments of high-grade ore to Liverpool were made in 1872 to experiment with various refining methods.
Although Scottish residents confined their mining investment during this boom period, for the most part, to companies with London headquarters, one company, the Utah Cotton Wood Mining and Smelting Company, Limited, was promoted by John E. Watson, a Glasgow accountant. He prevailed upon four merchants, a solicitor, and a lithographer, none of whom had any mining experience, to join him in signing the memorandum of association of an exploring outfit that was examining silver-lead locations near Honeycomb Gulch, adjoining the Big Cottonwood Canyon. Either because of unsatisfactory reports on the property or a lack of enthusiasm on the part of Scottish investors, the project was abandoned within nine months. No actual mining was carried on, and any expenses incurred were shared by the promoters.
The two Utah companies floated under the guidance of George Batters quickly proved disastrous. In January, 1872, the assembled stockholders of the Utah Silver Mining Company learned that the vendors' statement had been highly colored; the entire working capital had been expended; and an additional debt of £8,000 had been created by the manager without consent of the London board. The Engineering and Mining Journal of New York in a sensational expose observed that the company had reached the position "that all mining engineers whose professional honor could not be bribed had expected when the English company bought it." In indignation the editor insisted on reporting what had happened in hopes the blunder would not be again repeated. The mines in Bingham Canyon obtained by "two sharps" had no veins but low-grade lead ore found in pockets. Unable to sell the property in the United States, they had turned to England. Before doing so they had built a furnace and hired a metallurgist
who told them the ore was of no profitable value. They reportedly replied that their only interest was in seeing slag running, and at this point the metallurgist resigned. Then they obtained a statement from John R. Murphy, "a generally discredited man," lauding the property after he was promised the managership. When the battle was enjoined between the American and British "experts" over the soundness of the mines, the Journal had suggested,
Rumors now circulated in Salt Lake City that Murphy had thrown lead bars into the furnace while the investigating expert from England was momentarily away from the works thereby increasing bullion to a profitable level. Others insisted that a secret agreement had been signed by the mining experts to share the profits of the promotion. When the furnace failed to process the anticipated metal, the decision was made to rebuild it. A second smelting plant of larger capacity was constructed before it was recognized that the ore of Bingham Canyon contained so little lead and silver that it could not be profitably reclaimed at the current price of coal and iron ore needed for smelting.
Soon news arrived that Bateman had been arrested on the streets of London and was in prison. The specific charge was that he had sold a Nevada mine guaranteeing representations that proved untrue. Somewhat cynically, the Territorial Enterprise of Virginia City commented:
The Utah Mining Journal in reprinting the report mentioned that Bateman had "for many years enjoyed the reputation of being a sound and prudent business man" and was "held in high esteem for honesty and uprightness in all his dealings" in Utah. The editor expressed the hope that he was only a victim of unfortunate circumstances.
In this hour of crisis, the shareholders were in a quandary as to the action they should take. As usual, a committee of investigation was appointed. Another expert, Professor Clayton, assured them their property could be made to pay if sufficient development capital were raised. A decision was made to reorganize the board of directors, and Bateman, the vendor so recently in the toils of the British law, was named resident director in Utah. Warren Hussey, the Utah banker, was the chief creditor of the company, retaining possession of the smelter and threatening to take over the mine. Under the circumstances the company plans called for temporary discontinuance of smelting, with the ore being sold on the Salt Lake City market for what it would bring. Murphy's critics clamored for his removal charging him with preparing misleading reports to facilitate the marketing of the mine, with blundering and wastefulness that plunged the company into debt, and with forwarding inaccurate reports to London. One shareholder on his return from Utah reported in anquish that Murphy had sunk a shaft on the wrong side of the ledge and every foot he dug he moved further away from the ore. Others suggested that if their manager "was the most able smelterer on the Pacific Coast," as he had been represented by the vendors, "then heaven help the Coast, for the sooner it ceases to smelt the better." Hussey attempted to protect Murphy because he had made loans to him, but the banker was finally forced to refute statements made by the manager concerning the progress in repaying indebtedness.
The chaotic condition of the company made it impossible to raise funds to meet its obligations and resume operations. So it went through the legal process known as winding-up and then reorganized as the Utah Silver Lead Mining Company, Limited, with a capital of £70,000, one-half the original enterprise. In Utah, the mining press that championed the industry in the territory hailed the British determination to test thoroughly the property. John Longmaid, who had experience in England, France, and Turkey, replaced Murphy as manager. He complained bitterly that the London board ignored his communications and failed to establish policies. Suddenly in October, 1874, he wired the directors, "Discharge me and all the staff; there is no more ore to dress." The directors telegraphed Bateman, "Hurry to Utah. Mine shut down. Reply quickly." When reports came in from America everyone attempted to defend their reports and actions. Longmaid reported that his hands had al- ways been tied by the London directors who controlled the accounts and finances through a Salt Lake solicitor and who actually relied upon Bateman as their manager. "I cannot quietly consent to have my name smeared with dirt to shelter those who have no time to make themselves acquainted with the details of the business they control," he concluded. Needless to say, he had difficulty in collecting his salary.
After the atmosphere cleared, everyone recognized that the basic problem had been the changing nature of the ore at the mine in Bingham Canyon. Below the oxidizing zone the ores grew base, iron as sulphuret becoming common. This change necessitated the dressing of the ore before it went to the smelter, and it was for the purpose of building a dressing plant that the company was reorganized. Shortly after the works were completed, Longmaid discovered that the ores underwent still another transformation, changing suddenly to an almost solid zinc blend and becoming poor in galena as well as silver, and could no longer be processed at a profit. In bitterness, the chairman observed, "this is simply in accordance with the experience of everybody in Utah." The company wound up in 1875. Not only were there no dividends, but the entire investment was also lost except for a trifle realized from the sale of the plant. The British public had provided somewhere in the neighborhood of $750,000 for this initial Utah mining enterprise.
As soon as the Camp Floyd Mining Company, Limited, was floated, banker Hussey, engineer Sewell, and manager Shaw launched a campaign to sustain public confidence in the mining operation. The Salt La\e Herald reported, "Two more bars of silver from Camp Floyd mill were received at Wells [Fargo and Company] last night, making as Capt. Shaw informs us, six bars for the present week [August, 1872] worth $9,000." The Utah Mining Journal took up the theme, "Twelve beautiful bars of silver, of great fineness were shipped to New York yesterday" en route to London.
In spite of the propaganda campaign, returns were meager and shareholders began to complain when the value of shares, once at a premium, began to topple on the market. Under fire, Captain Shaw explained that the construction of a mill was delayed because the San Francisco foundry had accepted too many orders. Once the machinery arrived at Sandy station the weather was bad and the road so difficult that it took forty-two mules and eight yoke of oxen to move the essential equipment to the mine site. Shareholders could not agree at this meeting as to whether the Utah management or the London directorate was incompetent. Shortly thereafter Edward Brydges-Willyams, member of Parliament from Cornwall, banker, smelterer, and director of the Emma Company, visited the Camp Floyd Mine with Professor Benjamin Silliman and came away satisfied with the management and convinced that the company's problems stemmed from the refractory nature of the ore.
Suddenly in December, 1872, the company announced that the mill had been stopped because the returns would not pay the cost of extracting and processing the ore. Some shareholders clamored for a committee of investigation, but the directors threatened to resign en masse if one were appointed. Discussion centered on the role of Warren Hussey who was accused of sending favorable reports to London, marketing all his shares, and then allowing the manager to report the disappointing news. George Batters insisted that the Salt Lake banker had shown confidence in the mine at the beginning and as a shrewd speculator had purchased 2,000 shares at a cost of $150,000, but the moment the ore began to fall off he elected to dispose of his shares. In bitter disappointment the chairman announced that his name had appeared for the last time on the directorate of an American mining company. Although there were mines of unparalleled richness in Utah, Nevada, and California, "the gentlemen on the other side of the Atlantic know their business better than those on this side, and it was for Englishmen not to trust them any more."
In the summer of 1873, Henry Sewell took over the Utah management. As the company had no profitable ore, he concentrated his efforts on processing custom ore through the mill and complained that the British shareholders would not purchase larger quantities for processing. To make matters worse, Sewell apparently did not hesitate to mix business and pleasure. He had placed four bars of silver bullion in a jeweler's window in Salt Lake City, under a large photograph of May Howard, a popular actress appearing in a local theater. A caption for the display proclaimed, "Miss May Howard astonished at the purity of this bullion.... Her sweet smile indicates the impression of the purity of the silver." No objections could have been raised at this publicity stunt, but Sewell soon wrote the Camp Floyd millman to send him a $100 brick of pure silver to present to Miss Howard as soon as possible. Whether this was her fee for the publicity, or Sewell's determination to win her favor, was never clearly explained. When the sequence of events was reported to London stockholders, there were howls of protest.
The mining interest in Utah supported Sewell to the hilt in his dealing with the British investors. The latter insisted on winding-up and selling the mill for about one-third of its original cost of $90,000. In reality the unsatisfactory results of this company were not due to inefficient management, but the fact that the ore had deteriorated until it was too base to be treated by a simple milling process. Some mining engineers thought the British should have built roasting furnaces and made further reduction experiments — that they had a tendency of "taking hold too brash and letting go too soon" in dealing with American mines. However, by this time the British had concluded that "no incubation, however protracted, can bring anything out of a rotten egg."
Although the Batters' companies were on the road to dissolution in 1872, the Flagstaff syndicate still enjoyed the support of the British investor because of implicit confidence in the distinguished directors. Upon favorable reports by mining engineers, who had previously served the Flagstaff Company, the Last Chance Silver Mining Company of Utah, Limited, was organized to work claims at the head of Bingham Canyon. The mines were opened up, a reduction works was constructed, and a narrow-gauge railroad was built to connect the company's smelter with Bingham and Sandy. The Utah Mining Journal enthusiastically reported on developments, noting that the English company had "large capital and enterprising management." Once the reduction works was completed, Nicholas M. Maxwell, who was the joint manager of this company and the Flagstaff, learned that the Bingham Canyon ore did not contain enough lead to mill easily and was, therefore, unprepared for processing in the smelter. So the company bought an adjoining lode which, though poor in precious metal, had sufficient lead to serve as a good flux. In spite of difficulties, seven dividends of 2s. each were periodically disbursed to shareholders during the first year.
This syndicate promoted a third company in 1873. The Tecoma Silver Mining Company, Limited, was heavily capitalized at £300,000 to purchase property in the Lucin District, in the Goshute Mountains near the Nevada line about seven miles south of the Southern Pacific Railroad. The prospectus revealed the vendors to be Erwin Davis and Asa P. Stanford, the brother of the famous railroad builder Leland. Davis had been the prime promoter of the Emma, Flagstaff, and Last Chance companies; and the directors of the Tecoma proclaimed that they "implicitly rely on the good faith of the vendors, and upon the report of Mr. Maxwell," the manager of their Utah properties.
The Central Pacific Railroad prevailed upon Maxwell and the London directors to ship their ore to the smelters at Truckee, California, for refining, rather than to build a smelting plant near the Utah mines. The railroad donated a section of land to the company along the line and constructed a loop of rails to facilitate the loading of cars at the site of the new Tecoma station. Preferential rates were promised on the shipment of ore to Truckee and on the return of bullion. Of the £300,000 capital £280,000 went to the vendors, £130,000 in cash and £150,000 in paid-up shares, leaving very little for development. This financial arrangement was typical in all companies where Davis was the vendor. As usual, the shareholders were promised immediate dividends, in this case at the rate of 24 per cent a year.
The last British-financed Utah mining company worthy of note is the Chicago Silver Mining Company, Limited, capitalized at £150,000, to purchase property in Dry Canyon, eight miles from Rush Lake, Tooele County, in 1873. The vendor was William S. Godbe, well-known Utah merchant and mining promoter. As early as 1869, Godbe had assumed the leadership of a small group of Mormon intellectuals urging the Mormon Church to co-operate with the Gentiles in the territory, terminate social and economic solidarity, and encourage the development of mining. Their unacceptable views were described as the Godbeite heresy. Once the schism had developed over Mormon economic policy, Godbe ignored the wishes of the majority and concentrated much of his time and energy on the mining industry. He sold his property to the British with the understanding that he would serve as general manager for two years taking his compensation at the rate of two per cent of the dividends paid.
At first the company freighted its ore in mule-drawn wagons to the railroad and shipped it to Liverpool for processing. This ore proved exceptionally valuable. The London directors praised the management of Godbe, and shares in the company sold at a premium. As usual, the British invested in improvements. A reduction works was erected on Rush Lake near Stockton so refining could be conducted in Utah. A steam hoisting works was constructed within the mine; and a steel tramway, a quarter of a mile long, was built to convey the ore from the mine to the mouth of Dry Canyon where it could be loaded more easily in wagons. The Utah mining journals expected this company to be a success and "do much to inspire confidence with our transatlantic cousins, whose experience in American mining we are sorry to say has not been all that we had hoped." In spite of the early promise, shareholders assembling for the first annual meeting were told by the company chairman, Rear Admiral Lord John Hay, that the £20,000 allotted for development had been exhausted and the ore had not proved to be of the quality anticipated. Godbe journeyed to London for this meeting, and the shareholders expressed confidence in his management in spite of financial disappointment. By the end of 1874, discontent had developed. Shareholders insisted the directors propose to Godbe that he return some of the paid-up shares he had received in payment for the property as it obviously had been too highly appraised.
Throughout 1873-74, the British investor in the Utah mining industry gradually realized that the dissolutionment experienced by the shareholders in sev- eral companies was but a prelude to financial disaster for all enterprises promoted during the boom. The lesser companies were among the first to go. The London office of the Saturn Silver Mining Company of Utah was soon reprimanding its manager for extravagance in insisting on carpeted floors in the Utah office and for including whiskey as an "incidental expense" in his accounts. The rich galena in Bingham Canyon turned out to be iron pyrites. Rather than liquidate immediately an attempt was made at reorganization under the guidance of the heaviest investors, but the reconstruction was a fantastic reshuffling of shares and the public would have no part of it.
The Saturn Company shared its manager with the Mammoth Copperopolis Company of Utah, Limited. A costly plant was erected in the Tintic District only to discover that it was improperly located since the water supply was sufficient to generate steam for only a few months out of the year. Lord Chaud Hamilton admitted the company had not been fortunate in the choice of its manager. Ore was consistently processed by this company, but the falling prices for the metal lead to a decline in income. Soon there was not enough money to pay the miners, and the Utah newspapers, unconvinced that the property was a liability, accused the British of shipping bullion home while the men went unpaid. Tiring of the continuous struggle to defray operating costs, the company suspended operations, accepting the loss of the original investment.
In the Little Cottonwood Canyon, between incompetence, dishonesty, and extravagance, matters went from bad to worse for the Davenport Mining Company, Limited. The superintendent having heard stories of rich gold mines in South America suddenly took off for that continent. The mine foreman left for parts unknown. In the end the property had to be attached and sold to satisfy the claims of creditors.
British grievances and losses in these smaller companies were minimal in comparison with those associated with the Emma and Flagstaff syndicates. The Flagstaff-Last Chance-Tecoma syndicate, headed by Sir Alexander Malet, was the last to succumb to disaster. In February, 1873, while the Tecoma Company was being floated, shareholders were reminded that the other two companies were among the three Anglo-American mining companies whose shares were at a premium on the British Stock Exchange. The Flagstaff Company had paid dividends at the rate of twenty-four per cent a year until November, 1872, when it had been increased to thirty per cent. The chairman confidently anticipated that the mine was "a sound and remunerative investment [that] would outlast all their times, and eventually be handed down with undiminished success to their children." Admiral Leopold Heath inquired whether or not, in view of developments with the Emma Company, the shareholders were being kept in a "fool's paradise." Another shareholder noted that the vendors shares were being marketed very rapidly and inquired if something could not be done to "stop these rats from running away from the ship."
First of all, the London directors lost confidence in their manager when the ores of the Tecoma Company proved unprofitable and those of the Last Chance Company in Bingham Canyon too refractory to reduce. Maxwell was replaced by a British naval officer, Captain Forbes, who immediately sent such adverse reports home that the shares began to topple on the market. Suddenly, the tone of his reports shifted, possibly because the American vendor, Erwin Davis, gave him 550 fully paid shares in the company. Forbes elected to manage only the Flagstaff and Last Chance mines and soon Raynar St. Stevens was placed in charge of the Tecoma.
Unable to continue dividend payments sufficient to sustain share values and faced with mounting indebtedness, the directors of all three companies borrowed funds from the vendor without notifying the shareholders. With incredible cunning or naivete, they circumvented the legal limitations on borrowing in the Articles of Association by the simple expedient of contracting to deliver ores to the vendor in the future. Davis forced the directors to sign an agreement whereby he appointed his agent as manager of the Utah mines until the ore taken out had paid for the loans he made to the companies.
When his appointee, J. N. H. Patrick took over, the shareholders protested loudly demanding that the properties be returned immediately to British control. W. H. Burnand, director of the Flagstaff and chairman of the Tecoma Company, referred to Davis as "Mephistopheles" and commented that it was impossible to find agents in the United States capable of dealing with a "sleek sly Jew." Patrick's appointment was accepted by the Flagstaff and Last Chance, but when he arrived at the Tecoma Mine, St. Stephens refused to surrender the property. Patrick attempted to enforce the change by displaying a loaded pistol, whereupon the Englishman knocked him to the floor and with his foot on his chest inquired, "Now, Sir, who will have the mine, me or you ? I stand here as the representative of the Tecoma Company. I have received no advice from the directors to deliver the mine to you, and until that is done I will not part with the trust that has been given to me." Soon St. Stephens was ordered to hand over the property to Patrick, and upon his return to London he received little recognition for his loyalty.
The shareholders of each of the companies called upon the directors to resign at the earliest opportunity. Debate raged over whether advantage would be gained by suing the board collectively or singly. The companies next turned their attention to resolving their legal entanglement with Erwin Davis, who quietly observed developments from his hotel suite in Paris — refusing to enter the British Isles. The new board of the Flagstaff worked for a compromise, but representatives who went to Paris were told that no discussion was possible until Burnand resigned. He did so; and on the return of the shareholders' committee, Davis reported the company owed him £140,000 and that he was prepared to operate the mine taking fifty per cent of the profits to be applied to his debt and give the company fifty per cent. Negotiations broke down at this point.A reorganized board then voted for "war to the knife," but the shareholders in annual meeting overruled them and named a committee to go to France.
The previous compromise was agreed upon, but the directors delayed in calling a meeting for its ratification and when they did so the shareholders demanded evidence of Davis' sincerity and rejected the agreement. The committee asked for a poll of the shareholders who now shifted positions and overwhelmingly voted for compromise, for a policy of peace, and an end of litigation. A desperate jurisdictional struggle ensued in which it was proposed that the directors and shareholders' committee be merged into a single board. This was done. The original shareholders' committee failed in attempting to have a conference with Davis. Instead he announced his departure for the United States and stated that he would have no communication with the company until every man on the board who had accused him of dishonesty had resigned. The members of the shareholders' committee were then repudiated for having been duped, and a decision made to take legal action against the vendor in Utah.
While this hassle disrupted the Flagstaff Company, the directors of the Tecoma filed suit against the vendor without consulting the shareholders. Simultaneously, they tried to gain restitution of a portion of the purchase money on the grounds the property was misrepresented in the prospectus. Finally, in 1875, the directors resigned on the grounds that they could not continue to direct a Utah mining operation over which they had only partial control. As a practical mining operation, the Tecoma was finished.
In 1877, the Utah Supreme Court finally disallowed the contract made between the Flagstaff directors and Davis, making it possible to break the control of the latter over the property and oust the manager. Meanwhile, Davis established the legality of his claim against the Last Chance Company for £21,000 by action in New York courts. However, the Flagstaff claimed the Last Chance owed it money, and the manager hauled much of the usable equipment away to the site of the Flagstaff in Little Cottonwood Canyon. Lawyers were taking steps to sell the entire Last Chance property when the company chairman arrived in Salt Lake City just in time to procure an injunction stopping the auction. Funds were raised to pay off the Flagstaff Company, and by 1878 the Last Chance Company was free of litigation. For the next ten years the company worked its properties, and reorganized repeatedly to raise more capital, but the whole project was abandoned in 1888.
Scarcely had the Flagstaff Company recovered its mine when it was discovered that the land patent obtained by the original board did not follow the Flagstaff lode but was located at right angles to it as a result of a clerical error. A full investigation revealed that the directors had given their new manager, A. G. Hunter, a ten-year lease to the property without the knowledge of the shareholders. He was also given money to buy up claims known as the South Star and the Titus that had been filed on land the company had been working on the assumption that the acreage was its own. The United States District Court had meanwhile awarded the owners of these claims damages to the amount of $45,000. Hunter purchased an interest in the two rival claims with company money but had recorded them in his own name and later transferred them to a partner. He had then given up his lease with the directors while his partner entered suit against the company for $230,000. The directors had deceived the shareholders, and the manager had in turn deceived the directors.
Erwin Davis seized the opportunity to enter suit in the New York courts against the directors for having turned the mine over to Hunter when his claims were still unpaid. As soon as the shareholders could assemble, the directors were forced to resign. Then the shareholders tried to nullify the lease agreement with Hunter on the grounds that he had prior knowledge of the land patent situation. The Flagstaff tried in other court action to defend its property rights by arguing that it could pursue the vein from the discovery tunnel in all directions even though it passed through the claim of another. This mining principle, reaffirmed in the recent Emma-Illinois case, was reversed by the United States Supreme Court. The Flagstaff possessed about 100 feet square where their patented claim crossed the lode and no more. There seemed no way out of the confusion but to bring the company legally to a close and reorganize.
In the process of reorganization, Professor M. C. Vincent, who had so glowingly described the property in the prospectus, emerged as the dominant personality of the company. With the aid of Salt Lake lawyers, the owners of various and sundry claims along the Flagstaff lode were brought together in a single company, and the English took steps to buy back the property they had worked for years. The transaction was complicated by the legal action of Erwin Davis. One territorial court said he must be paid a debt of £76,000 before the sale could proceed, but the Supreme Court of Utah overruled the decision. The professor was granted £5,000 in paid-up shares for his responsibility and assistance in seeing the company through the crisis.
For the next fifteen years, the professor labored in vain to make the Flagstaff a paying proposition. Labor was difficult to procure; and engineers and mechanics, who could keep the hoisting works, tramway, and engines in working order, seemed unwilling to stay on the job. Repeatedly, in the 1880's, the company's buildings had to be rebuilt as a result of the avalanches of winter, and each time they were relocated.
Professor Vincent was under fire continuously from disappointed shareholders, and as early as 1882 he was requested to resign as chairman of the company. Even minimal development and exploration work was costly, and periodic reorganizations, in 1885, 1888, and 1889, were carried out to raise sufficient funds to carry on. The company conducted its business through the London Bank of Utah, and periodically foreclosure proceedings became necessary to prod the British into making another subscription. In desperation, Vincent at times mortgaged the property to large shareholders, whom he expected to accept debentures at the maturity date, in order to raise funds. In time, a reorganization was approved and the London Mining Journal commented,
The reorganized company attempted to remove the professor from the board of directors in 1889. He traveled from the United States to London to attend the meeting and launched such a tirade against the other directors that they resigned in a body. Between 1889-93, the professor and his friends controlled and operated the Flagstaff Mine. A disastrous fire in 1891 added to the usual difficulties. In 1893, an effort was made to make Vincent the general manager but remove him from the directorate. This failed because the professor retained the loyalty of the company chairman, George Hopkins, and between them they held a majority of shares.
After twenty years the English shareholders had enough. If they could not get rid of the professor, they could shut off the small amounts of money periodically sent to Utah. The Flagstaff was "lying fallow" in 1895. The price of silver had fallen very low, and the company ceased Utah operations to husband its resources to purchase the Star of Coolgardie Mine in western Australia. 80 The legal existence of the Flagstaff and Emma companies, and even the Last Chance, had been extended far beyond the period when these enterprises were a vital factor in the Utah mining industry.
Without exception, the British companies, organized to develop and operate Utah mines between 1871-73, were victimized by the modus operandi for the promotion of overseas mining companies. As a result, overcapitalization was the rule rather than the exception. The price paid for some properties was ridiculously high. This was particularly true of those endeavors sponsored by the syndicate headed by Sir Alexander Malet. Such a large percentage of company capital was paid to the vendors that the funds available for development work were impossibly inadequate. More payments should have been made in shares, rather than cash, and some kind of tying agreement negotiated to force the vendors to hold them until specific expectations had been fulfilled.
Opportunistic vendors like Erwin Davis made a practice of picking up wellknown American mines, past their peak of production, and unloading them in England. London stockbrokers and promoters, like George Batters, were easy prey for unscrupulous Americans. As we have noted, the role of the "mining captain" or engineer, often of doubtful reputation, was the key to the success in interesting the investing public. The British were quick to attack American engineers who had reported favorably on a property when it failed to produce up to expectations. Yet, there were examples, as in the case of the Utah Silver Mining Company, Limited, where an American engineer presenting an adverse appraisal of a property was overruled by well-known English experts. While the debate raged over the comparable reliability of American and British engineers, Englishmen investing in Utah mines were victimized by both. A final dangerous mistake of promoters and directors was resorting to secret agreements, as in the case of the Flagstaff Company, because deceit was always uncovered and shareholders quite naturally lost confidence in their directors.
Once a company was launched, problems of management both in Utah and in London developed. Western mining men were always appalled at the extravagance displayed at British mines and processing plants. Directors were entirely too sanguine. The most extreme example of this was the decision of the Flagstaff Company board to borrow money to maintain dividend payments on the promise of future ore deliveries that did not materialize. The problem of long distance management was basic, but it should not have been insurmountable in Utah where railroad and telegraph provided rapid travel and communication. Directors often admitted to shareholders that they had difficulty enforcing policies established in London, in spite of annual treks of members of the board to Utah to investigate and report. Competent managers, British or American, apparently were very difficult to locate. No one seemed to realize that financial reserves had to be established to deal with natural disasters beyond the control of man that could disrupt mining and milling operations as in Little Cottonwood Canyon where snow slides demolished buildings and equipment, or in Bingham Canyon where the flooded mines had to be drained.
In addition to problems of promotion and management, the English were handicapped by the limited knowledge of metallurgy at the time. Although they provided the money to install and experiment with the latest technical devices for raising, transporting, and processing ore, they were victimized by a lack of scientific knowledge in smelting and refining. In most cases, they had tremendous quantities of low-grade ore that proved so refractory to the known methods of reclaiming the precious metal that the process was uneconomic. Moreover, the major emphasis in Utah of the 1870's was upon silver; and as the price of this metal declined because of major discoveries in Nevada and Colorado, the margin of profit disappeared.
The mining industry of Utah had been in its infancy when the British so eagerly acquired possession of the best-known properties on the market. However, within a three-year period British opinion concerning the entire territory drastically changed from one of praise to derision. Financial calculations alone quickly reveal a justification. The British had committed themselves to invest £2.12 million in six large Utah companies. The value of shares in these companies quickly reached a total of £3,389,000 on the British stock exchange. By January, 1874, they were worth £425,000. These major enterprises thus represented a loss of £2,974,000, just short of $15 million in less than three years time. An additional £700,000 were lost in the smaller Utah companies. Is it little wonder that the British public, having lost between $18 million and $19 million in Utah mines, developed strong reservations?
After 1874, British investment in American mines slowed down for the remainder of the decade. A modest revival of company formation began in London in 1880 reaching a peak between 1886-88 reminiscent of that between 1870-73. The far-flung activity included many of the mining states and territories in western America, but of all the West, Utah was the least favored by the British investor. Perhaps the incessant reorganizations of the Flagstaff, Last Chance, and Emma companies were too painful a reminder of the past. Only three Anglo-American companies were registered to operate Utah mines in the entire decade of the 1880's. Of these, only one actually engaged in mining. There was not a single company launched during the period of greatest activity, 1886-88. In contrast, English capital poured into California, Colorado, Nevada, and elsewhere to finance development work and experimentation in mining and smelting operations.
Without doubt, Utah suffered from the malpractices and misfortunes associated with the British mining boom of the early 1870's more than any other western mining community. As the leaders of the Church of Jesus Christ of Latter-day Saints surveyed the scene, being human they no doubt received a great deal of self-gratification. The church was certainly in a position to say, "We told you so." However, the historian with the advantage of hindsight can not fail to express regret that the church hierarchy did not use its mature judgment, its insight into the frailties of man, and its dominant influence to direct the development of Utah's mining industry in this critical initial stage. The end result we have described and attempted to analyze.
Moreover, because the Mormons who dominated Utah were known to oppose mining activity, historians for years have been mislead into assuming that the industry played a negligible role in the nineteenth century history of the territory. Even today books dealing with the mining rushes in the American West omit Utah as the grand exception in the area. More recently this myth that mining was comparatively unimportant in Utah in the generation following the Civil War is gradually being dispelled by the investigations of Professors Leonard J. Arrington, C. Gregory Crampton, and others.
The most recurring theme in the economic history of the American West has been the exploitation of "outside" capital. Events in Nevada and Montana have provided the most glaring illustrations. Historians seeking an exception to the story of the abuse of the West by non-resident capitalists have often referred to Utah where the Mormon Church was recognized as a restraining influence on economic exploitation throughout the nineteenth century. Certainly the experiences of British investing in the Utah mining industry of the 1870's and the impact of their activity on the development of the territory suggest that historians must be cautious in suggesting that the exploitation of Utah's resources by eastern and foreign investors was less abusive than elsewhere in the West.
Fortunately, the history of the British impact upon the mining industry of Utah does not end in the 1870's or even in the 1880's. The overproduction of silver throughout the Western States resulted in a steady decline in its market value between 1880-95, accompanied by an equally strong advance in the price of gold. A renewed search for gold got underway, and Utah was no exception. in 1896, rumors began to circulate that the great Centennial-Eureka Mine had been sold in England for $4 million. Upon this suggestion that the British were again turning to Utah, one mining journal of London noted,
BRITISH COMPANIES REGISTERED TO OPERATE MINES IN UTAH*
The editor was dead wrong. Within a matter of months the British-sponsored Utah Consolidated Gold Mines, Limited, capitalized at £300,000, had taken over the Highland Boy Mine in the Bingham area. For the first year the property was operated as a gold mine, and a cyanide and amalgamation mill was constructed to process the oxidized ores. As the mine was developed at greater depths, a large body of copper sulfides was uncovered that made the gold deposits insignificant by comparison. The company selected a smelter site approximately 10 miles south of Salt Lake City with a dumping ground thought adequate for 25 years. By a program of expansion the British were able to produce 120,000 pounds of copper bullion a week at their smelters. 89 World-wide copper prices that had averaged between $.10 and $.11 a pound since 1891, suddenly jumped to $.17 in 1899, and remained to $.165 during 1900 and 1901, primarily because of the increased demands for the metal. As a result, in 1899 receipts from copper, gold, and silver were well over twice the expenditures for operation and expansion by this company. Earnings reached a peak in 1900 that made it possible for the company to return the entire original investment the shareholders had made in 1896.
The British, who had experienced such bitter disaster in the silver boom of Utah in the 1870's, had returned at last to the state to participate in a gold mining revival that led them to tremendous rewards in copper. The twentieth century history of Utah mining has been primarily a story about copper rather than gold and silver. The chief scene of the historical drama has been at Bingham Canyon. The British were proud to have been present when the curtain was raised on the first act.
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