The Quezon Boom

South of Ottawa, in the sleepy little Canadian town of Arden, Ont., with a population of 255, there was last week a great hullabaloo. Eleven miles beyond Arden two prospectors named Newton and Alexander had staked gold claims. Ore from these diggings, assayed by the Canadian Mines Department, was reported to contain $200 to $600 of gold per ton. Hollinger Consolidated Gold Mines, Ltd., had bought the claims and was about to start drilling while dozens of mining engineers, hundreds of prospectors were stalking Arden's once placid streets. Again Depression, which steeps most men in gloom and poverty, was demonstrating its power of bringing hope and sometimes wealth to those who tie their fortunes to gold.

The demonstration was not, however, the most striking evidence of the peculiar power of gold over Depression. The Philippines has not only a gold boom but also a mining stock boom, and last week its fine frenzy was augmented because it had virtually been given an official blessing by no less a person than strutty little Manuel Quezon, President of the Commonwealth.

It was the second boom of its kind in three years. The first one struck the Philippines in 1933 when the dollar was cut loose from gold. In that year 14,658 Philippine gold claims were staked. The Philippine gold mining business, which had only been coming into its own about the time Depression hit, went zooming. A boom in gold stocks swept like a typhoon through Manila. Then the stock boom collapsed, as such booms do, but not the mining business.

Newly discovered mines came into production. The price of gold was now $35 an oz. instead of $20.67. The value of the islands' annual gold output jumped from $5,700,000 in 1933 to $11,600,000 in 1934, to $15,600,000 in 1935 and this year is well on the way to over $20,000,000. As such only two of the islands' exports, sugar (valued at $35,000,000 in 1935) and coconuts (valued at $35,000,000 in 1935) will be more important.

This growing business was temptingly profitable. Its tales of wealth, sudden and not so sudden, are fabulous and some of them are real. Dean of the gold mining business is old Judge John W. Haussermann, who went to the Philippines 38 years ago as a second lieutenant of the 20th Kansas regiment and returned last July as Republican National Committeeman to hear Alf Landon accept his Presidential nomination. The tale concerning him is that anyone who put $100 into his Benguet Consolidated Mining 25 years ago would be worth $500,000 today. Even so, although he nursed his company along since 1909 it did not get into the big money until after 1926 when new ore deposits were discovered. Not until 1933 did its earnings exceed $2,800,000 a year; last year it earned $3,600,000.

In 1927 the Balatoc mine was a $500,000 hole in the ground, which borrowed $250,000 more, paid it back from earnings in less than two years and by 1934 was paying $2,000,000 a year in dividends. Several other mines have had smaller but equally brilliant records, accompanied by tales of Tom-Dick-&-Harry made rich overnight.

This was boom talk. All that was needed to start another mining stock boom were a few "circumstances": 1) prospective Philippine independence which will put other Philippine exports outside the U. S. tariff wall, thereby making them unattractive for investment; 2) $16,000,000 of AAA sugar benefits which poured into the islands; 3) the Spanish revolution which marooned Spanish capital in the islands; 4) the greater venturesomeness of British and Chinese capital.

Mining stocks rose gradually. Then two months ago the boom hit. Compared to a year ago, the stocks of most of the established companies have nearly doubled in price. The prices of typical new companies have doubled, tripled and quadrupled, mostly quadrupled. All summer between 10 a. m. and noon the Manila Stock Exchange on the Escolta was crowded with "Escolta miners'5--lawyers, doctors, merchants, newspapermen, government officials, speculating gleefully, many of them starting with no more than 100 pesos ($50) capital. Five Americans and five Spaniards, said to have been worth almost nothing a year ago, were credited with becoming millionaires.

In one day the exchange had a turnover of 7,451,127 shares--most of them priced at only a few cents, but 100% profit is just as good on a cheap stock as on an expensive one. The exchange was a bedlam. With only 20 members, its facilities were swamped. Tickers were ordered from the U. S. so that customers might go to brokers' offices instead of to the exchange to do business. Brokerage became tremendously profitable. Seats on the exchange which sold for $500 when it was organized three years ago were worth $4,000 last December, are now valued around $30,000 each.

This glorious sensation of sudden riches could not help being felt in high places. Fortnight ago, President Manuel Quezon with more moderation than most of his compatriots put his blessing on the boom: "In their mines the Philippines have a storage of great wealth. If reports of the Bureau of Science are justified I believe that our country is one of the richest in the world.

"If this industry is given encouragement, we can look to it to be of great help to us if, when the republic is proclaimed, we should lose some or all of our trade privileges. The industry will then tide us over until we can develop new markets or build new industries."

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