well-developed mineral deposit, with the
geological factors all well known and the demand and market well
established, it is reasonable to use a lower rate of interest. In
general, the mineral industry is regarded in financial circles as being
more hazardous than many other industrial lines; and money is put into
the industry with the expectation of a high rate of interest, no matter
how safe the investment may be. In actual practice interest rates used
in making valuations vary from 6 to 15 or 20 per cent.

It is clear that, where a property has long life, the interest will very
materially reduce the present value of the ores to be mined far in the
future. Reserves to be mined more than thirty years hence have
relatively little or no present value. Beyond a certain point,
therefore, the acquirement and holding of reserves for future use by
private companies has little commercial justification. This is a matter
which is too often not sufficiently well considered. Man's natural
acquisitiveness often leads him into investments which, because of the
time and interest factor, have little chance of successful outcome. Of
course a large corporation, anticipating an indefinitely long life, or
perhaps aiming at monopoly, may afford to hold reserves as a matter of
general insurance longer than a small company,--even though, because of
the interest rate, these reserves have no present value on their books.
It is likewise true that governments, looking forward to the future of
the nation, and without the necessity of paying so much attention to
interest and taxes, are not so limited by this consideration.

An illustration of the limiting effect of the interest rate on the
acquirement of long-lived coal deposits by private interests is
discussed in Chapter XVII on Conservation. Investments made many years
ago have so augmented, even at low interest rates, as to make it
practically impossible to count on a return of capital and interest; or
if the return were to be exacted from the public it would mean excessive
charges, which are not possible in competition with other mines not so
burdened.

In the commercial valuation of oil wells and pools, much the same method
is used as has been described for mineral resources in the solid form,
but the estimate of reserves or life is based on consideration of curves
of production of the sort mentioned on pages 134-136.

The essence of the _ad valorem_ method of valuation above described is