Willoughby: Rapscallions vs. speculators — who’s to blame? | AspenTimes.com

Willoughby: Rapscallions vs. speculators — who’s to blame?

Tim Willoughby
Legends & Legacies
One b/w photograph of the interior of Arkell and Stewart Mining Exchange building, on the corner of Hyman and Galena Street. There is a large sign in the center of the photo that says "Arkell's Exhange, Stock Quotations", with a list of various Aspen mines underneath. This image came from Aspen Illustrated (02.31.1 & 72.2.295).
Aspen Historical Society photo

“Every miner knows of mines which will yield very rich specimens for assay, the mine itself being worthless,” the Mining Industry and Tradesman opined in April 1892.

Mining publications and local newspapers commonly assumed the most optimistic view of any discovery, and rarely suggested skullduggery might be at play. But with their article, “The Black Wonder Mine Fraud,” the Tradesman used an entire page to expose a bad investment.

The Aspen Evening Chronicle had reprinted news of the Black Wonder Gold and Silver Mining Co.’s discovery near Lake City. The story covered only the good news: returns were high, nearly $1,100 of total gold and silver per ton ($26,000 in today’s dollars). The article compared the discovery to the successful Holy Moses mine in Creede.

The story in the Tradesman differed in tone from the one in the Chronicle. The Tradesman alleged that the test of the ore that gauged the Black Wonder’s mineral components — an assay — had used an atypical specimen.

An assay of a series of samplings yields the most accurate indication of a mine’s potential ore production. Some miners unwittingly submitted outlier specimens before they had unearthed enough ore to reflect a mine’s true potential. But other miners intentionally submitted atypical ore samples to attract investment.

The Tradesman’s allegations stemmed from the mine’s owners. Eastern capitalists had purchased the Black Wonder and were promoting it to Eastern investors. During that period, mining accounted for a large proportion of stock sales. In this high-risk, high-return speculation, investors bet fortunes for a small chance to win outsized profits. Those serious about weighing their odds may have taken a clue from the dearth of Colorado investors in the Black Wonder.

The company’s prospectus quoted Nevada silver king and Sen. John P. Jones, who said the mine would be second in value only to the Comstock. But the Tradesman conjectured that if the Black Wonder was that good, Jones would have bought it. The story concluded, “perhaps these capitalists are like what miners call ‘single blanket nabobs’ — men who are rich only in hope, faith, sharpness and rascality.”

Tension held sway between mine operators and mine speculators. As ever, the dishonest caused problems for the honest. Outside capital developed most mines, and a few shady characters shook the trust needed to scrape up necessary funding. The stakes were high for two mining investments, stock speculation and production dividends. But overall, speculation outperformed dividends.

The degree of false promotion and the scope of the swindles grew in direct proportion to the distance between the mines and the brokers. Arkell and Stewart, Aspen’s mining exchange, handled trading for many local mines. But the big exchanges in San Francisco, St. Louis, New York, Chicago and Boston sold many more shares to speculators in the East and England. Such out-of-town investors held an advantage when they bought stock in Aspen’s mines, compared with those who invested in the Black Wonder. They could travel to Aspen by train to consult with some of the industry’s best-known mining engineers before they made a major commitment.

Locals knew enough about the geology and comparable claims to better assess a mine’s potential. But in a geological twist of fate, one claim spewed silver and another coughed up dirt. Despite the odds, visions of silver danced in investors’ heads and they continued to gamble on a whiff of a rumor of a shadow of a mine.

Tim Willoughby’s family story parallels Aspen’s. He began sharing folklore while teaching Aspen Country Day School and Colorado Mountain College. Now a tourist in his native town, he views it with historical perspective. Reach him at redmtn2@comcast.net.