“There Is No Gold!”

Evening Star, Issue 21995, 3 April 1935, Page 5

“There Is No Gold!”

Failure of Bell—Kilgour Mine Directors Criticised By Shareholders Allegations of Mismanagement Denied “ You ptti down the failure of the company to the management by the board. That is ridiculous. The failure is due to the fact that ]kher« is no gold, or very little,- in the mine.” That was the answer of a director at the extraordinary general meeting of shareholders of. the BellJ&Igour Mining Company last night, which decided to proceed w ith the winding up of the company, after strong criticism-by shareholders, a section making no effort to disguise their feelings: of annoyance. One of the leading critics declared that the shareholder*-had been “ taken for , a ride,” and a ”” director'admitted-that they; had all been M had.” , The present low state, of the gold mining.industry was charged to the, conduct of the Bell-kilgour Cofapany, as one of the main companies on Cromwell’Flat/but the directors strongly defended themselves.

A CRITICAL OPENING Over seventy shareholders attended the meeting. Mr Hugh Adam presided, •nd with him at the main table were Messrs Robert 6. Hudson, J. A. Roche, R. Cuddie, and A; Mathieson (directors), and Mr H. A. Be Latour (mine manager). The critical mood; of a section was apparent early in proceedings, when the chairman put the motion for the confirmation of the minutes of the last annual meeting. I _ A shareholder asked: “ Did the chairman say anything? X heard - him •numbling.” Mr J. R. Deal '(lnvercargill) asked that a letter which he had addressed to the annual meeting be read, but the chairman proceeded to read the following statement:— “ Shareholders will remember that the prospectus stated that, in addition to the area of nine acres to be taken over from Messrs J. P. Bell; and William Kilgour (the Bell-Kilgour claim), the company had (a) an, option. for £3,500 over sis acres .and a-half of ground belonging to W. Murray, and (b) an option for £7,000 over a further nine acres belonging to William Kilgour. In order to gain an idea of .the possible value of these , two additional properties, your directors had a ■ geophysical survey made. In view of the results obtained therefrom, and on the advice of the engineer, they decided to take over Murray’s, but not W. Kilgour’s property. ‘‘ For the first, few months—up to September 30, 1933 —the claim was being opened up for future work. A roadway from the flat down to the entrance of the main drive was con-

structed; pumps and sluice boxes were installed, and:the main drive was well '’■ timbered.' The expenses during this period, including a proportion of overhead, amounted to £1,200, which was charged to development account. The first wash-up took place on October 6, 1933, and from then on there were regular weekly returns. Though expenses of working the claim were heavy conndering the small quantity of wash treated, the profit and loss account for the year ended July 31, 1934, showed a profit of £7O from the 801 oz of gold won. Up till that, time all work; had been- concentrated on- the Bell-Kilgour ■ection, but as the steadily reducing returns- indicated that the profitable ■-ground had been worked attention . was given to the Murray section. l ' From ■ the beginning of December all work was "concentrated on this area. , •“ It was not long before the manager encountered old .workings, and'every drive put in disclosed further workings till it became apparent that this ground . had been thoroughly treated by old ■miners many years ago. _ Though no rei Coords, are available, official or unofficial, ■ ;-in Cromwell, it seems - likely that this ' was..Scotland*a claim, abandoned some

, fifty to sixty years ago. ■ .' “ A correspondent in the Press had i recently suggested that shafts or bores , be put down to test the strata below • the level of the present workings. He . felt, considering that the present bed ; of the Kawarau was much lower than : ; the channel covered by our claim, that there may be . a lower channel at a 'Sdepth similar to.the present Kawarau -‘River bed. The directors had already • f considered this ‘ possibility, but had 'bbahdoned the idea. , The ■ geological • 'report on'.the district, based on the observations of Professor. Park, states that:

“‘The geological sequence com- ' miences with schist as the basement rpok, overlain by quartz conglomer- , -atesi with lignites, and gypsiferous clays T containing a freph-water mollusc (Diploden). An angular discordance is present at the top of the gypsiferous clays, which are overlain by the Mnnuherikia Lacustrine series (Park), composed of - sandstones,' clays, ' arid gravels;’ It „ it on the:eroded surface of the lacus-

trine beds that the gold-bearing guttlers occur. Furthermore,'the geophysical survey disclosed that the depth of the bottom of the channel on the claim was 145 ft from the ten-ace level. Now, this is the level of the company’s workings, which are on a sandstone bottom, so that we may take it is established that there, is no old bed belojv our claim. _ Moreover, a wellknown boring engineer reported to the directors that it would be impossible to bore the claim on account of the

! nature of the ground, which is covered with immense boulders. To shaft it would also be very costly. > “ The question of sluicing the claim was discussed by the directors and prices obtained for plant and working costs. The directors concluded on

the advice of an experienced mining engineer, that in view of the small yardage and the expense of pumping “ ■ water, sluicing was out of the question : for a small claim of only fourteen - acres. . . “ Tentative negotiations were opened ' up with the Bell-Hooper Company with . a view to amalgamation for sluicing purposes,so as to reduce the cost, but, though the directors of Bell-Hooper were given all the information we had • nothing came of the negotia-

tions. “ Shareholders will see from the foregoing that every avenue has been tried v m an endeavour to make a success of • the claim, but we are now constrained to face the unpleasant fact that the pompahy cannot be made to.pay.

“ Your directors, feeling that the position was hopeless, and that to continue working would be to throw good money after Bad, have called this meeting to consider winding up the company. In arriving at the estimated return to shareholders of id per share, no allowance has been made for the value of the claim, but if this should be sold the return to shareholders will be proportionately higher. In conclusion, we may say that the results have, been a severe disappointment to everyone concerned, and we sympathise *with shareholders for the loss they have sustained.” Mr ■ Adam ; moved the following resolution ‘ ‘ That the company be wound up voluntarily, and that T, H. Thompson and Sons, public accountants, he and they are hereby appointed liquidators for the purposes of such winding up.” After a long spell of quietness Mr Hudson seconded the motion. “ I can see no good in going on with the company,” he said. “ From our experience there does not appear to be any gold there. A lot of you, of course, blame the directors, but we will not touch on that at the present time.”

WORKED OUT CLAIM BOUGHT.

'Mr 8. B. Macdonald ■ said he had listened very patiently to the chairman’s report of the workings of the company, but there was one point, among many others, to be brought forward later, that should be elucidated. To whom were their thanks to be given for the purchase of the Murray claim? They found that it was well known in Cromwell that the claim had • been worked some fifty or sixty years ago, yet, at the time of the incorporation of the company, the diretcors recommended shareholders to pay £3,500 for something that was absolutely worthless—a fact that should have been known to the directors at the time. Further, from whom was the Murray claim purchased? . Certain correspondence and articles had appeared .in dominion newspapers in recent weeks in relation to the con"duct of the company, which the directors had seen fit not to answer. A suggestion was made that the directors, fore, this should have taken the shareholders into their confidence, and answered the very telling letter, of a fortnight ago, if they had nothing to hide. The directors stated last Saturday that they; did not want any dirty linen washed in public.or wordsto that effect. He wanted to find out the exact legal position of the “ gentlemen sitting at the top table.” : In his opinion, they had, in two ways, disqualified themselves as directors of the company. (Hear, hear; and applause.) PROMOTERS' SHARES. In the first place, they admitted, at the annual meeting, receiving brokerage on shares sold on behalf of the company, and that was passed over as something that was usually done. If he had been present then, the extraordinary meeting would not have been held, as he would have taken proceedings in re money which they had allegedly received as directors. Further, certain statements in reference to promoters’ shares were made in a northern financial paper. The original allotment papers showed that they were allotted to the various directors, in spite of-the fact that the memorandum of agreement of incorporation definitely stated that only one director (Mr Roche) was interested in the promotion, and was the, only one who would receive promoters’ shares. ' Mr J. M, Paterson: Who said that? Mr Macdonald: Is Mr Paterson a shareholder. Mr Paterson: I prepared the prospectus, and I should know something about A Director; Mr Paterson is solicitor to the company, ~ In reply to Mr Macdonald, Mr Adam said the solicitor was present at the request of the directors. Mr Roche was the only one interested in the promotion of the company. Mr Roche: Quite true, Mr Macdonald; Well, we find in the allotment' of the shares on June 23, 1933, that Hugh Adam received 7,000 shares, Richard Cuddie 2,000, and J. 4Mathieson 2,000. They were directors. I want to know what the legal position is to-night. In the legal opinion and my opinion the directors can have no standing. (Applause.) lam here with the strict intention of voting against the motion, and, if every shareholder considers his interests, he will vote against it. As, no amendment is possible. I ask them to vote against it for the purpose of holding a meeting fourteen days hence, when the shareholders will decide on the course of action they will take in the liquidation of the company. In spite of the invitation made to the directors, T notice that Thompson and Sons are still mentioned as liquidators. I have the very highest respect for Mr Thompson, but if the directors have nothing to fear they should alter that part of the motion and appoint the Official Assignee to act as liquidator. (. ‘‘Hear, hear.”) “ I feel very strongly in this matter, because I am absolutely certain that every shareholder in this company was ‘taken for a ride,’” said Mr Macdonald. “ And I am determined to spend my good money in finding bow far the Companies Act‘protects the investors of New Zealand in a matter of this sort.” (‘‘Hear, hear.”)

PROSPECTUS DEFENDED. As promoter, Mr Roche said the statement in the prospectus regarding promoters’ shares was absolutely correct. The directors had had nothing whatever to do with the promotion. He gave them the shares after the declaration was handed to the secretary, as he recognised that no remuneration in the way of directors' fees would recompense them for their time. (Cries of “ Oh!”) That was the truth, whether they believed him or not. Some did not want to hear the truth; evidently they were present for a set purpose. Mr Cuddie had telephoned him and stated that there was, something wrong, as he had not been allotted promoter’s shares. They were to be allotted to him or his nominees, and he had presented the shares to the directors as a gesture of his appreciation of what they had done. Murray’s claim was purchased on the engineer’* recommendation, based on the geophysical survey of the district. Mr Macdonald had mentioned that it was common property in Cromwell that the ground had been worked out. For many years miners had been looking for the old Scotland workings over a threemile stretch. THE ENGINEER’S REPORT, Mr C. H. Lewis said that the engineer had stated that he had not had the opportunity of studying the geophysical survey when he recommended the purchase. Mr Roche replied that that statement referred to the survey of the Cromwell Flat generally. A survey was later made in the immediate neighbourhood. Mr Lewis: That does not qualify the statement of the engineer. He raised the point of possible action against the engineer. Mr Hudson said he had expressed an opinion at the annual meeting that the engineer was not liable for an action. _ Mr Lewis said some very definite statements in the report to the company were not correct. Mr Hudson: The directors believed that it was an honest report. If he required a report on gold mining he would not know an engineer in town to whom he could go. (Laughter.) Mr Roche said others beside the engineer had been “ taken down ” in the claim. After making a personal investigation an experienced and well-known miner had asked for the reservation of £I,OOO worth of shares. A Shareholder: Did you reserve them? Mr Roche: No. He did not get ail his shares. We have all been “had.” It did not come up to what we thought it was. Confirmation of Mr Roche’s statement that promoters’ shares were not allotted to the directors was given by Messrs Cuddie and Hudson, who said that Mr Roche had never mentioned promoters’ shares to him until the other night. When Mr Allen resigned from the board he was asked to join, and it had been a “nice picnic,” Did the directors desire the shareholders to understand that they were not aware of the allotment of the shares until the last week or so? asked Mr Macdonald. He drew attention to section 269 of the Companies Act, under which directors were liable for accepting promoters’ shares. Mr Adam explained that he was m a worse position than the other directors, as he had bought 6.000 shares from Mr Roche.

Mr Hudson said no mention, was made of the shares on the allotment night. . The secretary gave details ot the allotment, and said the shares in question were entered in the register two months later, as they could not be sold along with the contributing shares. When the scrip was issued the directors had communicated with him. The directors had not given a thought to the shares. Mr Paterson said there was no rule, as quoted by Mr Macdonald, preventing the acceptance of promoters’ shares. Directors could not accept qualification shares from promoters, however. Mr Macdonald said the rule was not qualified in any way. Mr Hudson: I expected Mr Macdonald to believe me. Mr Macdonald; I hold you in the highest respect, and I am not discussing you at all, I want that to be thoroughly understood. Mr Hudson: Thank you. MAKES SORRY READING. u I think all shareholders other than the directors will agree that the general management of this company makes extremely sorry reading,” said Mr Deal. “We know that at the present time the mining companies’ position is in a parlous state, due in no small measure to the management of this company. There is no question about it. We hear Mr Roche making some definite but not very convincing statements regarding the promoters’ shares. We hear that he has made a gift of these shares to the directors. Evidently he realised that the names of those gentlemen were such as to give the company a boost along.” Mr Roche: The company did not need any boosting. Mr Deal: All the directors have sheepishly got up and said they knew nothing about it. Why did they not hand them back ? Mr Roche: The shareholders would not have been the richer for that. “I am speaking now; you keep quiet,” retorted Mr Deal, fie noticed the broad smiles of the directors, and he hoped they did not think the matter was humorous. It was ghastly so far as the shareholders were concerned. His original question on the subject of his letter to the annual meeting had been ■ ignored by the chairman. He had not received the courtesy of a reply. Mr Deal proceeded to read the fetter, which at that stage pointed out that the company was in a parlous condition. A HEATED EXCHANGE. A reference to the salary of the secretary brought Mr T. H. Thompson, a shareholder, to his feet. “I object,” he exclaimed. “I am the father of the secretary.” ,

Mr Deal: I am not making an accusation against the secretary. Mr Thompson, sen., said the salary at the time was inadequate. Mr Deal did not know what he was talking about.

Mr Deal’s letter continued that it was a gross extravagance if similar salaries were being paid to the men at the mine. He added that it might be thought by some that the letter was rather strong. “Bather!” commented Mr Thompson, “It was crass ignorance.” As an accountant, said Mr Deal, he considered that the figures in the first balance sheet spoke _ for themselves. He was against the directors, who were probably well-known men. But results, not names, counted, and the results of this company made extremely sorry reading. He was labouring under a_ sense of hurt, and the general feeling in Invercrgill—a strong mining centre—was that the affairs and administration of this company had been, in a complete measure, responsible for the present state of the mining industry in New Zealand. Mr Thompson challenged Mr Deal’s statements, declaring that the previous speaker knew little about secretarial work.

NO MISMANAGEMENT.

Mr Deal: My letter is entirely impersonal, but this man’s tongue is running away with him.

“You put down the failure of this company to the management by the board. That is ridiculous! replied Mr Hudson. “ The failure is due to the fact that there is no gold, or verv little, in the mine.—(Hear, hear.) You cannot point out where there has been bad management. I have attended all meetings except two, and I won’t have it said that there has been bad management. It is due to the want of gold. You ask why we did not exploit the London market with a thing that was no good. That is what you want us to do. If the claim is no good, let us lose our money, and be men over it. I don’t know how much you have in the company, but I have lost more than you.” Mr Deal: You can afford it. Mr Hudson said he had lost £350, Mr Adam £BOO, and Mr Cuddie £SOO. Mr Deal: They may be big men m this city, but that does not count for anything so far as I am concerned. _ “ I would not think so,” rejoined Mr Hudson.

Mr Deal said he did not suggest that the mine should be put on to the other unfortunates, as they had been. It had been suggested that the whole of Cromwell Flat could be dredged. He did not mean “ pushing off anything absolutely useless.” Mr Hudson: I accept your explanation. A combination with Bell-Hooper for sluicing had been rejected by the latter company, and the Government, he understood, was opposed to the dredging of the Cromwell Flat.

STOCKBROKERS AND BOOMING.

“ The position to-day is due to the Stock Exchange and the stockbrokers,” said Mr Hudson. “ They boomed this company before the shares were allotted at 6d to 9d premium.” After explaining the nature of the property, the mine manager (Mr H. A. de Latour) said two syndicates in Cromwell had spent £I,OOO in trying to find Scotland’s reef. That was in answer to a statement that it was common knowledge in the district that the ground had been worked, “ I think the majority of the shareholders are aware of the fact that the rush was made before the company was listed,” said Mr Ralph Malcolm to Mr Hudson. “ You said the Stock Exchange was responsible.” Mr Hudson: I said the brokers.

“In any case, the company’s listing was held up for a query regarding the capital and a tremendous number of shares were sold on the streets before we brokers did anything,” said Mr Malcolm. Mr Gates said he presumed the Government was paid for the geophysical survey. Mr Adam: Yes. £SO. “It seems regrettable that they could not have discovered the old workings,” said Mr Gates. Mr de Latour explained that the survey only gave a rough indication of the channel and not the effect ; of the old workings. Mr Gates; Did they inform you that the survey was not reliable ? Did the Government warn you that it was only approximate? The Chairman: Tea. Mr Gates : And the property was purchased in spite of that? “ It is proof that the survey is not worth the paper it was written on,” remarked Mr Macdonald. Mr Gates: That is what I am getting at. PURCHASE OF MURRAY CLAIM. ■ In reply to Mr Macdonald the chairman said the Murray claim was purchased in terms of the contract, having been sold by Mr William Murray to J. A. Roche for £3,600, Mr Macdonald: Was Mr Roche informed by Mr Murray, who owned the ground for many years, whether the ground had been worked? Mr Roche: Mr Murray was not aware of the fact. ' When we got in we found that Scotland had removed the gold. Mr Macdonald: And we were left with the sack! Mr Roche: Yes. Mr Murray had the choice of the ground, and he would not have chosen a worked-out piece. The indications were that the ground was virgin. . The chairman was proceeding to put the motion for liquidation when Mr Macdonald made another appeal that the Official Assignee should be the liquidator, so that the matter would go through the courts to satisfy all and to clear the names of the directors. He was prepared to stand corrected publicly. He knew Mr Thompson, who was highly respected, but the names of the directors had to he _ cleared. Certain statements were being made in the city, and if they had nothing to fear they should agree to the alteration. Mr Hudson: Who is making the statement? „ . , . . Mr Macdonald: The statement is being made publicly. Mr Hudson: Where? . Mr Macdonald: In papers in the north. . , “ And the man js not game enough to put his name to it,” remarked Mr. Hudson.

CAMPAIGN OF MALIGNMENT. Mr Macdonald: I am game enough to say that I am not satisfied, I say thousands in this city are maligning the names of the directors. If they have nothing to fear, they should alter the motion, Mr Hudson; 1 am not afraid of what those thousands think about me. On the motion being put and defeated on the voices, the chairman called for a poll. His ruling was challenged, and Mr Paterson explained that Mr Adam was within his rights as chairman. _ The motion was declared earned by 184,150 votes to 60,825. . Mr Deal asked particulars of the assets expected to produce $d a share to shareholders. The chairman: All the plant and the claim. We might get a decent figure for the claim. (Laughter). Mr Hudson said the assets consisted of: Cash and gold in hand, less sundry accounts, £1,700; plant, tools, etc (book value £769), estimated to produce £2OO, making total assets of £1,900. The estimated cost of winding up the company was £IOO, leaving £I,BOO as a surplus to be divided among the shareholders. If anybody was fool enough to buy the claim, they would receive more, Mr Macdonald: There is one born every minute. (Laughter), After a lengthy discussion - and tangle over motions and amendments, the liquidators’ fee was fixed at £75. As a shareholder, the secretary said that the statements made concerning the directors were legally without foundation. He strongly defended the integrity of his firm. As there was a feeling that the shareholders’ interests had lie jeopardised, he moved that a committee of three be formed to act with the liquidators. The motion was carried, and Messrs Hudson, Macdonald, and Torrance Cuddie were elected as the committee.