Part 16 (1/2)

This matter is further elaborated in some mines, in that winzes and rises are written off at one rate, levels and crosscuts at another, and shafts at one still lower, on the theory that they lost their usefulness in this progression as the ore is extracted.

This course, however, is a refinement hardly warranted.

Plant and equipment const.i.tute another ”suspense” account even harder to charge up logically to tonnage costs, for it is in many items dependent upon the life of the mine, which is an unknown factor. Most managers debit repairs and maintenance directly to the revenue account and leave the reduction of the construction outlay to an annual depreciation on the final balance sheet, on the theory that the plant is maintained out of costs to its original value. This subject will be discussed further on.

INHERENT LIMITATIONS IN ACCURACY OF WORKING COSTS.--There are three types of such limitations which arise in the determination of costs and render too detailed dissection of such costs hopeless of accuracy and of little value for comparative purposes. They are, first, the difficulty of determining all of even direct expenditure on any particular crosscut, stope, haulage, etc.; second, the leveling effect of distributing the ”spread” expenditures, such as power, repairs, etc.; and third, the difficulties arising out of the borderland of various departments.

Of the first of these limitations the instance may be cited that foremen and timekeepers can indicate very closely the destination of labor expense, and also that of some of the large items of supply, such as timber and explosives, but the distribution of minor supplies, such as candles, drills, picks, and shovels, is impossible of accurate knowledge without an expense wholly unwarranted by the information gained. To determine at a particular crosscut the exact amount of steel, and of tools consumed, and the cost of sharpening them, would entail their separate and special delivery to the same place of attack and a final weighing-up to learn the consumption.

Of the second sort of limitations, the effect of ”spread” expenditure, the instance may be given that the repairs and maintenance are done by many men at work on timbers, tracks, machinery, etc. It is hopeless to try and tell how much of their work should be charged specifically to detailed points. In the distribution of power may be taken the instance of air-drills. Although the work upon which the drill is employed can be known, the power required for compression usually comes from a common power-plant, so that the portion of power debited to the air compressor is an approximation. The a.s.sumption of an equal consumption of air by all drills is a further approximation.

In practice, therefore, many expenses are distributed on the theory that they arise in proportion to the labor employed, or the machines used in the various departments. The net result is to level down expensive points and level up inexpensive ones.

The third sort of limitation of accounting difficulty referred to, arises in determining into which department are actually to be allocated the charges which lie in the borderland between various primary cla.s.ses of expenditure. For instance, in ore won from development,--in some months three times as much development may be in ore as in other months. If the total expense of development work which yields ore be charged to stoping account, and if cost be worked out on the total tonnage of ore hoisted, then the stoping cost deduced will be erratic, and the true figures will be obscured.

On the other hand, if all development is charged to 'capital account'

and the stoping cost worked out on all ore hoisted, it will include a fluctuating amount of ore not actually paid for by the revenue departments or charged into costs. This fluctuation either way vitiates the whole comparative value of the stoping costs. In the following system a compromise is reached by crediting ”development”

with an amount representing the ore won from development at the average cost of stoping, and by charging this amount into ”stoping.”

A number of such questions arise where the proper division is simply a matter of opinion.

The result of all these limitations is that a point in detail is quickly reached where no further dissection of expenditure is justified, since it becomes merely an approximation. The writer's own impression is that without an unwarrantable number of accountants, no manager can tell with any accuracy the cost of any particular stope, or of any particular development heading. Therefore, aside from some large items, such detailed statistics, if given, are to be taken with great reserve.

WORKING COST SHEETS.--There are an infinite number of forms of working cost sheets, practically every manager having a system of his own. To be of greatest value, such sheets should show on their face the method by which the ”spread” departments are handled, and how revenue and suspense departments are segregated. When too much detail is presented, it is but a waste of accounting and consequent expense. Where to draw the line in this regard is, however, a matter of great difficulty. No cost sheet is entirely satisfactory. The appended sheet is in use at a number of mines. It is no more perfect than many others. It will be noticed that the effect of this system is to throw the general expenses into the revenue expenditures, and as little as possible into the ”suspense” account.

GENERAL TECHNICAL DATA.

For the purposes of efficient management, the information gathered under this head is of equal, if not superior, importance to that under ”working costs.” Such data fall generally under the following heads:--

LABOR.--Returns of the s.h.i.+fts worked in the various departments for each day and for the month; worked out on a monthly basis of footage progress, tonnage produced or tons handled per man; also where possible the footage of holes drilled, worked out per man and per machine.

SUPPLIES.--Daily returns of supplies used; the princ.i.p.al items worked out monthly in quant.i.ty per foot of progress, or per ton of ore produced.

POWER.--Fuel, lubricant, etc., consumed in steam production, worked out into units of steam produced, and this production allocated to the various engines. Where electrical power is used, the consumption of the various motors is set out.

SURVEYS.--The need of accurate plans requires no discussion. Aside from these, the survey-office furnishes the returns of development footage, measurements under contracts, and the like.

SAMPLING AND a.s.sAYING.--Mine sampling and a.s.saying fall under two heads,--the determination of the value of standing ore, and of products from the mine. The sampling and a.s.saying on a going mine call for the same care and method as in cases of valuation of the mine for purchase,--the details of which have been presented under ”Mine Valuation,”--for through it, guidance must not only be had to the value of the mine and for reports to owners, but the detailed development and ore extraction depend on an absolute knowledge of where the values lie.

CHAPTER XVIII.

ADMINISTRATION (_Concluded_).

ADMINISTRATIVE REPORTS.

In addition to financial returns showing the monthly receipts, expenditures, and working costs, there must be in proper administration periodic reports from the officers of the mine to the owners or directors as to the physical progress of the enterprise. Such reports must embrace details of ore extraction, metal contents, treatment recoveries, construction of equipment, and the results of underground development. The value of mines is so much affected by the monthly or even daily result of exploration that reports of such work are needed very frequently,--weekly or even daily if critical work is in progress. These reports must show the width, length, and value of the ore disclosed.

The tangible result of development work is the tonnage and grade of ore opened up. How often this stock-taking should take place is much dependent upon the character of the ore. The result of exploration in irregular ore-bodies often does not, over short periods, show anything tangible in definite measurable tonnage, but at least annually the ore reserve can be estimated.

In mines owned by companies, the question arises almost daily as to how much of and how often the above information should be placed before stockholders (and therefore the public) by the directors. In a general way, any company whose shares are offered on the stock exchange is indirectly inviting the public to become partners in the business, and these partners are ent.i.tled to all the information which affects the value of their property and are ent.i.tled to it promptly. Moreover, mining is a business where compet.i.tion is so obscure and so much a matter of indifference, that suppression of important facts in doc.u.ments for public circulation has no justification. On the other hand, both the technical progress of the industry and its position in public esteem demand the fullest disclosure and greatest care in preparation of reports. Most stockholders' ignorance of mining technology and of details of their particular mine demands a great deal of care and discretion in the preparation of these public reports that they may not be misled. Development results may mean little or much, depending upon the location of the work done in relation to the ore-bodies, etc., and this should be clearly set forth.

The best opportunity of clear, well-balanced statements lies in the preparation of the annual report and accounts. Such reports are of three parts:--

1. The ”profit and loss” account, or the ”revenue account.”

2. The balance sheet; that is, the a.s.sets and liabilities statement.