o the investor can be considered as
interest or profit; but in mines, a portion of the annual income
must be considered as a return of capital. Therefore, before the
yield on a mine investment can be determined, a portion of the
annual earnings must be set aside in such a manner that when the
mine is exhausted the original investment will have been restored.
If we consider the date due for the return of the capital as the time
when the mine is exhausted, we may consider the annual instalments
as payments before the due date, and they can be put out at compound
interest until the time for restoration arrives. If they be invested
in safe securities at the usual rate of about 4%, the addition of
this amount of compound interest will assist in the repayment of
the capital at the due date, so that the annual contributions to
a sinking fund need not themselves aggregate the total capital to
be restored, but may be smaller by the deficiency which will be
made up by their interest earnings. Such a system of redemption
of capital is called "Amortization."

Obviously it is not sufficient for the mine investor that his capital
shall have been restored, but there is required an excess earning
over and above the necessities of this annual funding of capital.
What rate of excess return the mine must yield is a matter of the
risks in the venture and the demands of the investor. Mining business
is one where 7% above provision for capital return is an absolute
minimum demanded by the risks inherent in mines, even where the
profit in sight gives warranty to the return of capital. Where
the profit in sight (which is the only real guarantee in mine
investment) is below the price of the investment, the annual return
should increase in proportion. There are thus two distinct directions
in which interest must be computed,--first, the internal influence
of interest in the amortization of the capital, and second, the
percentage return upon the whole investment after providing for
capital return.

There are many limitations to the introduction of such refinements
as interest calculations in mine valuation. It is a subject not
easy to discuss with finality, for not only is the term of years
unknown, but, of more importance, there are many factors of a highly
speculative order to be considered in valuing. It may be said that
a certain life is known in any case from the profit in sight, and
that in calculating this profit a deduction should be m