The Firm received another significant setback at eight-thirty in the morning on July 15, when a “dull, heavy,” mortarlike explosion boomed through Gold Cañon. The two boilers of the Petaluma Mill exploded. The Firm shared ownership with Alvinza Hayward and John Percival Jones. The monstrous explosion blasted the mill to smithereens and sent metal chunks weighing hundreds of pounds flying hundreds of yards in all directions. Impacts killed three people, injured a number of others, and destroyed saloons, hotels, homes, and businesses throughout the neighborhood. The Firm had a good reputation for taking care of people who were injured or killed in its employ. Paying for the massive collateral damage, rebuilding the mill, and fairly compensating the injured and the families of the killed cost the Irishmen significant sums at a time of great financial exposure.
The 1,167-foot level drift reached a point 100 feet inside the Con. Virginia boundary in the third week of July 1872. From there, Curtis and Fair decided to make their first westward crosscut, back toward the lode, which everyone involved considered the most likely place to find ore. The Con. Virginia crews who worked the 1,167-foot level spent most of August driving the crosscut. The air quality plummeted as they turned away from the main drift. The Roots Blower in the Bonner Shaft’s hoisting works that ventilated the drift struggled to push enough air through the 2,000 feet of wooden box-pipe that carried air down the shaft and along the drift to the leading edge of the workings. Candles dimmed in the oxygen-depleted air, and the work stalled in “very hard” ground. Then, the miners encountered a heavy wall of expansive clay they supposed constituted the long-hoped-for hanging wall of the Comstock vein. Observers anticipated an “important development” within the week. None came. Running through the country rock outside the vein for the last four months, Con. Virginia miners hadn’t been troubled by water. However, an undrained water chamber lurked behind the heavy clay. Attempts to break through unleashed scalding torrents. Fair and Curtis had no alternative but to bulkhead the crosscut and hope they could work around the water chamber farther into Con. Virginia ground. The threatened flood was an expensive disappointment, for it meant embracing another long stretch of dead work through ground in which all experience told them there’d be no hope of making a strike. They’d run nearly 500 feet of drifts and made the one long crosscut in four and a half months of brutal, sweltering labor nearly 1,200 feet below the streets of the town, immolating the assessment money they’d raised in March and April, and they hadn’t found a ton of rock worth milling.
Fair and Curtis returned their attention to running the main 1,167-foot level drift another 100 feet to the northwest, to a point from which it made sense to attempt another westward crosscut they hoped would outflank the water chamber. The stock market reflected the letdown. Con. Virginia stock gave up most of a recent rise. But on September 12, 1872, running the main drift northwestward and 178 feet inside Con. Virginia ground, one of Sam Curtis’s crews hit something unusual—a 3- to 7-foot-wide cross-fissure filled with clay, porphyry, and quartz, some of which contained low-grade ore. The best portions assayed from seven to thirty-four dollars per ton, nothing close to the best ore selections of an actual Comstock bonanza, but the first genuinely positive indication they’d encountered in four and a half months. Low-grade rock sometimes presaged high-grade discoveries. Curious, they excavated the vicinity. Preliminary inspections revealed something odd, something unique—the fissure pinched off to westward, toward the Comstock. The fissure’s going end trended in almost the opposite direction, to the northeast, almost exactly perpendicular to the run of the main drift. Following the fissure would mean drifting away from the Comstock, away from where they expected to have the best chance of finding ore. Fair, Curtis, and every other miner in the drift knew that no significant bonanza had been found outside the confines of the main lode in the entire thirteen-year history of the Comstock. Fair and Curtis pushed the main drift another dozen feet to the northwest, prospecting the environs of the cross-fissure, but when that effort revealed nothing of interest, they returned their attention to the cross-fissure, “ore is where you find it” being one of mining’s oldest saws. They turned the main drift down the cross-fissure, away from the Comstock Lode. Fair had also likely sent a coded telegram to John Mackay at the first good indication.
“No new developments that we are advised of,” said the Gold Hill Daily News that Saturday. “The proprietors and managers of this mine keep their own counsel. . . . They must have a good thing.”
Stockbrokers bidding in “high glee” nearly doubled the value of Con. Virginia shares during the next week. The San Francisco Chronicle reported rumors among traders that attributed the rise to “a strike in the lower level crosscut,” but added that it was “difficult to obtain decisive news.” Contrarian traders thought it was “a put up job.” Unremarked on by market observers were heavy purchases of Central No. 1, on rising prices. James Flood and William O’Brien almost certainly drove the advance. In the coming months, both Central No. 1 and Central No. 2 quietly came under the Firm’s control, which gave them sway over every inch of ground between the Best & Belcher and the Ophir. The Chronicle described Con. Virginia stock “jumping up and hopping down” through the third week of September, propelled by “confidential whisperings,” many of them contradictory.
In truth, on the 1,167-foot level, the Firm didn’t know what they had. They’d found clay and porphyry mixed with low-grade quartz in an odd location trending in a baffling direction. They had an unusual and optimistic indication, nothing more, and certainly no guarantee of bonanza. Elsewhere on the Comstock, “ore” that hovered just below the level of profitability had proved a will-o’-the-wisp that had baited miners into pouring money into worthless mines for years—Mackay’s experience with the Bullion mine providing a cardinal example. The ore in the Con. Virginia fissure averaged about twenty-two dollars per ton. Only the fact that it had to go up the shaft whether or not it contained metal justified its extraction from such an expensive location. However, James Fair took discovery of the cross-fissure as the good indication he and his partners had been awaiting. He thought it justified additional investment. Executing the strategy he and his partners must have agreed on before Mackay’s departure, after months of cost-conscious development, Fair suddenly started spending money like the second coming of William Ralston. A whirlwind of activity erupted around the Con. Virginia as Fair began preparing to enlarge the hoisting works, replace and upgrade the machinery, and sink the Con. Virginia’s shaft to meet the 1,167-foot-level drift coming north from the Gould & Curry.
On September 18, Con. Virginia superintendent Sam Curtis told the Territorial Enterprise that he was “confident of finding good ore in the mine.” The next day, John Mackay landed in New York aboard the SS California. If Mackay had lined up the railway connections perfectly, it would have taken him another seven or eight days to reach Nevada. With Mackay probably well into his transcontinental journey, the Consolidated Virginia trustees levied another assessment on September 26. (Mackay wasn’t a trustee, although his three partners were.) The Virginia & Truckee Railroad had extended from Carson City to Reno, but Mackay likely reached the Comstock a few days too early to have been aboard the V&T’s first passenger train from Reno when it puffed and hissed into Virginia City at 5:45 a.m. on October 1, 1872.
The Con. Virginia assessment baffled and angered the San Francisco Chronicle, whose editorial policy took it as an article of faith that mine insiders manipulated stocks and information to fleece the public. “Why levy an assessment if ore is struck?” they wondered.
The question exposed their ignorance of the costs and risks of Comstock mining. The “ore” in the strike was barely profitable, there wasn’t much of it, and sinking the Con. Virginia’s shaft another 650 feet would cost well over $300,000, likely about doubling the Firm’s financial commitment to the mine.
• • •
While large work crews swarmed over the Con. Virginia hoisting works preparing the upgrades, the Belcher
connected its incline to the 1,100-foot level, improving ventilation to parts of the mine where temperatures previously reached 115 degrees. Hoisting through the incline lessened the demands on the three mules still laboring “in the subterranean.” Belcher superintendent Hank Smith decided he no longer required Susan B. Anthony’s services. A less humane management would have “retired” the mule in place, but William Sharon wouldn’t countenance that sort of cruelty to animals. Smith had “the boys” truss up Susan B. Anthony’s legs and tightly wrap her in canvas in preparation for the hoist. Honking and braying against the indignity, she bucked and kicked for every one of the thirty minutes it took to hoist her to the surface. Susan B. Anthony reached the shaft house in a “smoking lather of sweat” and couldn’t stand for an hour, having strained her legs kicking against the ropes and canvas. The poor mule hadn’t seen daylight in more than six months. Once she regained her feet, mine workers noted that she seemed fatter and fitter on the shaft landing than she had before being sent down. Mary Jane Simpson and Old Pete continued their long shift underground. The Gold Hill News reported both “in fine condition.”
The great contemporary furor in the mining world blazed around “the most gigantic and barefaced swindle of the age,” a bizarre fraud, started two years before by the supposed discovery of rich, hush-hush diamond fields in Arizona that climaxed that November, when the U.S. Geological Survey’s explorer/scientist Clarence King exposed the hoax. (By then, the site of the strike had migrated to Colorado.) Investors eager to get in on the ground floor of the next big thing may have lost as much as $2 million. One of the bigwigs snared by the deception was the Bank of California’s William Ralston, scorched to the tune of a quarter of a million dollars.
The jaw-dropping success of the Belcher mine made the loss easier for Ralston to swallow. In 1872, Nevada mines outproduced California’s. Indeed, the single state of Nevada produced roughly half of the wealth mined west of the Missouri River. The Comstock Lode produced more than half of Nevada’s total, and the single ore body shared between the Crown Point and the Belcher disgorged more than 75 percent of Comstock bullion. Belcher output increased fourfold in 1872. Crown Point production had more than doubled. They were the two richest mines in the world, and the opening of the Crown Point’s 1,300-foot level revealed it to be chock-full of “a high and uniform grade of ore.” In his annual report, Superintendent John Percival Jones described it as “by far the richest and most extensive level ever opened on the Comstock Lode.” The ore body had increased in length, width, and richness as miners descended on it, which tempted Jones into inserting some hyperoptimistic puffery into his conclusion: “It is fair to presume that we have passed below the range of surface-disturbance, and that the vein will penetrate the earth in its present shape to an infinite depth.”
William Ralston, William Sharon, Darius Ogden Mills, and the handful of other men who held significant blocs of Belcher stock soon knew that the Belcher’s share of the 1,300-foot-level bonanza was every bit as extravagant as the Crown Point’s. Booming mines also poured money into the Virginia & Truckee Railroad, which ran more than thirty trains per day into Gold Hill and Virginia City. Splendid revenues had the V&T far down the road toward eliminating its debt, which would allow it to pay dividends. The success of the V&T and the Belcher’s astonishing dividends not only pulled William Ralston back from the brink of financial disaster, but re-energized his ambitions. If he learned a lesson, it was the wrong one—he behaved as if the Comstock Lode would always come to his rescue.
Ralston ran wild as underground developments revealed the extent of the Belcher ore body, and not only as the dupe of fraudulent diamond dreams. He invested in schemes all over his beloved California, and he loaned large quantities of Bank of California money to three companies he controlled himself, including the New Montgomery Real Estate Company, a stagnating property development project he’d nursed since the end of 1868.
Ralston fell ill in December 1872, possibly the consequence of stress and overwork. When he returned to work in February 1873, the bank directors assembled in his office. They’d inspected the books in his absence and discovered the three Ralston-controlled companies owed the bank in excess of $3.5 million. This time salvation came from the coffers of John D. Fry, Ralston’s father-in-law and William Sharon’s lifelong friend. Fry had grown wealthy serving as trustee and president of Sharon-dominated mines and trading stocks on his advice. Ralston signed the notes he’d taken from the three companies on the bank’s behalf over to Fry along with all other associated collateral. He ended up owing his father-in-law $3.5 million. Ralston repaid Fry with Belcher dividends and Union mill profits, but as a consequence of Ralston’s latest near-catastrophe, Darius Ogden Mills insisted on selling his last five hundred Bank of California shares and surrendering his presidency. Ralston had no choice but to acquiesce. He assumed the presidency in place of Mills. However, in Ralston’s opinion, the Bank of California couldn’t afford to lose the high esteem in which international and eastern banking circles held Mills. Ralston paid for Mills’s stock, but didn’t register the change of ownership in official records. Without Mills’s permission or knowledge, Ralston had Mills elected to the Bank of California’s board.
Ralston’s influence extended to Washington. He was one of the thirty-odd “gentlemen” Treasury officials consulted about the reforms needed to wean the United States economy from the paper greenbacks circulating since the Civil War and return it to metallic currency. Questions about how to make that happen dominated economic policy discussions. Most Americans took it for granted that “hard” currency based on gold and silver was best for the economy, but two obstacles made it difficult to continue coining silver dollars as an official United States currency. First was political pressure brought to bear by bankers, economists, and hard-money advocates who imagined that only a gold-based currency could provide economic stability. Second was the large increase expected in the supply of silver, a significant chunk of which was being contributed by the Comstock Lode and its supposedly bottomless mines. Germany added to the anticipated increase when it announced that it would abandon silver coinage and convert to a gold standard. Unwilling to face the consequences of trying to maintain silver or bimetallic currencies in the face of German conversion, other European countries followed suit. If the United States tried to maintain its traditional sixteen-to-one fixed ratio between the two metals, traders would send European silver coins melted into bullion across the Atlantic and force the United States to sell more valuable gold for cheaper silver at the artificially fixed price, an arbitrage with the potential to bankrupt the Treasury. Ralston recognized that the United States couldn’t maintain a bimetallic currency in the face of that pressure, but he also knew that eliminating silver from the currency could do great harm to the Bank of California. Such a step would lessen American demand for silver, and since the fortunes of the Bank of California were known to be tied to the Comstock Lode, a collapse in silver demand would injure the mines. If that in turn caused a loss of confidence in the bank, it could provoke a killing run. Ralston devised a scheme to prop up silver demand by having Nevada senator William M. Stewart insert a provision into the Coinage Act authorizing the San Francisco Mint to coin silver trade dollars for use in China. The clause both discouraged the import of European silver and created a demand for Comstock silver that would incur a much lower transportation cost on its way to Asia than the European article. The Coinage Act of 1873 passed both houses of Congress in January 1873 without much public notice. President Grant signed it into law in February. Most Americans didn’t realize for several years that the act had demonetized silver. Only as the nation’s farmers and other debtors experienced the pain of deflation caused by the nation’s return to the gold standard would “the Crime of 1873” become a political rallying cry whose ramifications lasted for decades. Ralston’s creative trade dollar solution managed to find a balance between interests that seemed mutually exclusive. It wouldn’t help William Ralston
survive the perils ahead, but it did serve the interests of the Comstock Lode.
• • •
Mackay and Fair spent most of the autumn of 1872 and the winter of 1873 at the Con. Virginia, on site and underground, pushing their crews to finish the reconstruction and upgrade of the mine’s shaft house, engines, and hoisting and pumping apparatus, sink the shaft to 1,200 feet, and run the 1,167-foot drift farther into the promising cross-fissure they’d discovered in September. Under the watchful eyes of the two veteran miners and their superintendent, all the work was done “in the strongest and most durable manner.”
Mackay and Fair had their new machinery “steamed up” and tested several days before Christmas, readying the big push that would carry the shaft down to 1,200 feet. When they weren’t engaged in surface decision making or supervision, Mackay and Fair would most commonly be found deep underground, on the 1,167-foot level, working alongside their miners in sweltering heat and air so foul that a man could only stand at the drift face for ten or fifteen minutes before rotating back to cooler, more oxygenated air closer to the Bonner Shaft. The breakage of an air blower stalled work. Only after repairing or replacing the blower could they resume pushing ahead. Reports obtained by the newspapers mentioned “excellent indications” on the 1,167-foot level, but also worthless mixtures of quartz, porphyry, and clay, “hard, blasting porphyry,” and “no extra favorable indications in sight.” Probably worried they were drifting too far from the Comstock vein and uninspired by the low-grade ore in the fissure, Mackay and Fair directed another westward crosscut from about 100 feet down the cross-fissure. They managed to make almost 200 feet of northwesterly progress before an influx of hot water stopped the work. They started a fork from about two-thirds of the way down the crosscut and made another attempt. They pushed the fork until it, too, stalled against an undrained water chamber. Having exhausted what seemed like better options, they returned their attention to the cross-fissure.
The Bonanza King Page 39