KORANUI COAL COMPANY.

New Zealand Mail, Issue 386, 5 July 1879, Page 12

KORANUI COAL COMPANY.

(communicated.) Coal is everything to Westport. It is the magnificent beds of coal which abound there that the inhabitants look to confer prosperity upon the place in the future, and to assist Westport over its struggles in the present, of which it has had a full share. Therefore, anything showing light upon the mode iu which coal companies are floated and coal mines opened, must be of special interest to Westport, and of no little interest to all other coal producing parts of the colony. In connection with this subject the balance-sheet of the Koranui Coal Company, with accompanying statement of assets and liabilities, affords a good theme. It is probable that those who prepared and circulated the document thought that the attractiveness of the company’s prospects would prove irresistible ; yet, strange to say, the writer of this article—who has been furnished with a copy of the balance-sheet—after having carefully dissected the document, and availed himself of various sources of information bearing directly upon the subject, cannot regard it with the favorable eye that seems to be deserved.

The company is formed to open and work a seam of coal lyiug near the summit of Mount Frederick, about twelve miles from Westport. A railway has been made to the foot of the mountain, and the works necessary to be undertaken by the company are the bridging of the Waimangaroa, the making of 2£ miles

of incline tramway, the top end of which will be about 2800 ft. above the lower, and the opening out of the coal seam. No work appears to have been done, except the letting of the bridge contract for £1053, and the expenditure of £ll4O, representing cash paid to the promoters and travelling expenses. The nominal capital of the company is i 25,000 in 5000 shares of £5 each ; but this sum has been very materially lessened by the inevitable allotment of paid-up shares to the promoters, who in this case take the modest number of 525 fully paid-up shares, representing £2625, and cash to the amount of £525 6s. 7d What the promoters of this company did to entitle them to one-eighth of the entire eajiital of the company is somewhat difficult for an outsider to comprehend. It is, however, certain that the sum is out of all proportion to the benefits likely to accrue from the privilege of being a paying-in shareholder in the concern. . Experience of such things teaches that if these sums represent the price paid to the promoters for their interest in an unimproved coal area on the heights of Mount Frederick, the company lias paid too much for its whistle. Properties of this description have no actual market value whatever beyond what is given to them bv the expenditure of capital in their development. It is very strange, and almost incomprehensible, tliat after the experience derivable from the American and English mining-company swindles which have been exposed during the last few years, and the lessons afforded by our own collapsed coal and gold-miniuo- ventures that men should still be found who will put their money into companies formed on such principles. Paid-up shares are in all cases a dead drag upon companies, and form an element of never-ending discord, suspicion, and jealousy among the shareholders. If the promoters hold a property, the extent and value of which is merely speculative, and they are not disposed to risk their own money in tc proviuv” it, it is not a marketable commodity. They could not sell it for cash or a cash equivalent, and they have no right therefore to demand paid-up shares for it. If, on the other hand, they have a property of ascertained market value, let them be paid its equivalent in cash, and. if they want to have an interest in the business, they can take paying-in shares the same as other people. It has been proved over and over again that the practice of allotting paid-up shares to promoters is a thoroughly vicious and misleading one. It puts men off their guard, and they are not nearly so. careful in inquiring into the aim or objects of a proposed scheme, tliG reasonableness on the payment claimed by the promoters, or their ability to maintain payment of calls of shares, as they would be if they were tokl in the first instance that three or five or ten thousand pounds of the company's cash capital would be applied iu purchasing the business.

Of the balance of shares in the Koranui Coal Company only 2420 have been applied for, and 2055 are called “ unallotted ” held in trust for the company—a trust there is no doubt that the company would rather not be burdened with, and which judging by a late telegram from the Press Agency they are taking steps to rid themselves of. Upon the 2420 shares applied for, £2 per share has been called up in eight calls of 5s each. These calls which should have yielded £4840 have produced only £1998 155., and £2341 ss. remains unpaid, a fact which those who ruu may read, and which should prove to the most prejudiced observer that there is little or no vitality in the concern.

It is pretty clear from the foregoing that the position and prospects of the company are unsatisfactory—that the capital is totally inadequate to the objects of the company; that it will take a much larger expenditure than the shareholders are advised of to make the undertaking a success, and that the very best advice that can be given to the company is to reconstruct, doubliug, if not trebling, the capital, get rid at any cost of the paid up shares, and discontinue operations until the capital is subscribed. Apart altogether from the prospects of this or any other company, it is impossible to approve of the practice of forming these small companies. There were from fifteen to twenty leases originally taken up on the Buller coalfields, and each lessee looked to float a company and obtain a promoter’s interest for his lease. The dreams of most of these people have vanished, and it would be better if they were all allowed to do so, for whatever the interests of those who look to obtain pickings out of these small companies may be, it is certain that the interests of the shareholders would be best consulted by an amalgamation of all these areas, and the openiug of the coalfields by one good strong company. Shareholders may depend upon it that they will meet with quite as much competition as they can bear from Newcastle, Greymouth, the Bay of Islands, and the Otago and Canterbury mines, and these mines will do all in their power to guard the interests of the consumer by preventing a monopoly ; and if the?e small companies are formed it will eventuate in a hard and long struggle for supremacy, with ultimate winding up orders, contributions, and long bills of costs as a remainder.