80 CLASSIFICATION OF THE PUBLIC LANDS. 



It is generally agreed that the price paid for coal in the ground 

 should be recovered by the investor during the early years of the 

 mining, when the cost is lowest. Otherwise it must be recovered 

 when the inevitable increase in the cost of working the mine has re- 

 duced the profits and the business has reached a condition that is the 

 bane of the eastern coal-mining industry to-day. The initial invest- 

 ment should invariably be refunded within the first 20 years of the 

 life of the mine. The above table shows that if the mine is opened 

 and operated immediately and continuously after purchase the total 

 cost of the coal in the ground will be about two dollars for each 

 dollar of the purchase price. The value of coal in the ground at 

 the time of its extraction is measured by the current royalty rate in 

 the region where the coal is situated. Its value at the time the mine 

 is opened is, then, approximately one-half the royalty rate, as has 

 been indicated. "Were it possible to know in advance the exact num- 

 ber of tons that would be recovered from any acre of land, the value 

 of that acre at the beginning of mining would be one-half the 

 royalty rate per ton multiplied by the tonnage recovered. If- the 

 royalty rate is 10 cents a ton, the value of coal per ton in the ground 

 when a mine is opened is at least 5 cents. To insure profit and safety, 

 however, the purchaser of coal land, as a rule, in buying demands a 

 margin on the estimated tonnage value (1) as a consideration for 

 the risk of the investment, (2) to offset possible delays in the mining 

 of the coal, and (3) as a contingent against an overestimate of the 

 recoverable tonnage. If this margin is fixed at one-half the esti- 

 mated value, the coal should have a sale value of 2 J cents a ton if 

 the royalty is 10 cents a ton. Royalties on bituminous coals in the 

 United States range from about 3 to the equivalent of 35 cents a ton. 

 A comparison of royalties paid in the United States, some of which 

 are given in Survey Bulletin 424 (p. 10) shows that 10 cents a ton 

 is not far from the average royalty paid under private leases — some- 

 what less in the East, somewhat more in the West. Therefore 2-^ 

 cents a ton is a fair sale price for unmined coal that is to be mined 

 immediately, where 10 cents a ton is the prevailing royalty. As a 

 matter of fact, where the character and tonnage of the coal are well 

 known to both buyer and seller prices often range from one-quarter 

 the royalty rate almost or quite to the royalty rate. For example, 

 the Pittsburgh coal, in southwestern Pennsylvania, is worked to a 

 thickness of about 7 feet. On an estimate of 1,200 tons recovery per 

 acre- foot this bed should yield 8,400 tons an acre; yet it is reported 

 that 99 separate transfers were made in Westmoreland County be- 

 tween 1901 and 1910 at an average price of $1,102.70 an acre — over 

 13 cents a ton— and many of these sales were made at a price much 

 higher than this average. Occasionally the sale price for small tracts 

 adjacent to operating mines may reach the royalty rate. 



