In my previous estimate for 1916, I computed the value of the mines at eight billion dollars which was approximately 10 times their net income as reported to the Bureau of Internal Revenue. In making that estimate I fell grossly into error, for several reasons that it is unnecessary to explain, but chiefly because the net income of the mines of the country in that year was exceptionally large. The whole subject of valuing the mines of the country en bloc is extraordinarily difficult. At the best, no one can hope to arrive at anything more than a rough idea about it. However, elements of reason may be introduced and may be made to serve as chief bases.
The fundamental principle of mine valuation is the present worth of an annual dividend accruing during the period of years corresponding with the life of the mine. It is a convention that the estimated period shall not be more than 30 years, i.e., although an ore-body may be so developed as to afford a certain production for 50 years, the annual dividend is computed as continuing only for 30 years. In fact, the present value of a dividend that is not to be realized until after 30 years is so small as to be negligible. The present value of an annual dividend of $1 for 20 years is $12.46; for 30 years, $15.37; for 31 years only $15.59.
The value of metallurgical works should be estimated on the same principle. If directly associated with a mine they will become useless with exhaustion of the mine. If they are independent, a conservative estimation of their value will include writing off in 20 years to provide for their obsolescence. A useful life of 30 years may be regarded as an outside limit.
We may estimate, therefore, the value of the annual
