ade from
the gross profit for loss of interest on it pending recovery. This
is true, but as mines are seldom dealt with on the basis of profit
in sight alone, and as the purchase price includes usually some
proportion for extension in depth, an unknown factor is introduced
which outweighs the known quantities. Therefore the application of
the culminative effect of interest accumulations is much dependent
upon the sort of mine under consideration. In most cases of uncertain
continuity in depth it introduces a mathematical refinement not
warranted by the speculative elements. For instance, in a mine
where the whole value is dependent upon extension of the deposit
beyond openings, and where an expected return of at least 50% per
annum is required to warrant the risk, such refinement would be
absurd. On the other hand, in a Witwatersrand gold mine, in gold
and tin gravels, or in massive copper mines such as Bingham and
Lake Superior, where at least some sort of life can be approximated,
it becomes a most vital element in valuation.

In general it may be said that the lower the total annual return
expected upon the capital invested, the greater does the amount
demanded for amortization become in proportion to this total income,
and therefore the greater need of its introduction in calculations.
Especially is this so where the cost of equipment is large
proportionately to the annual return. Further, it may be said that
such calculations are of decreasing use with increasing proportion of
speculative elements in the price of the mine. The risk of extension in
depth, of the price of metal, etc., may so outweigh the comparatively
minor factors here introduced as to render them useless of attention.

In the practical conduct of mines or mining companies, sinking
funds for amortization of capital are never established. In the
vast majority of mines of the class under discussion, the ultimate
duration of life is unknown, and therefore there is no basis upon
which to formulate such a definite financial policy even were it
desired. Were it possible to arrive at the annual sum to be set
aside, the stockholders of the mining type would prefer to do their
own reinvestment. The purpose of these calculations does not lie
in the application of amortization to administrative finance. It
is nevertheless one of the touchstones in the valuation of certain
mines or mining investments. That is, by a sort of inversion such
calculations can be